Securities Law Commons^™

Primer: International Investment Treaties And Investor-State Dispute Settlement, Columbia Center On Sustainable Investment

Columbia Center on Sustainable Investment Staff Publications

What Are International Investment Agreements (IIAs)?
IIAs are bilateral or multilateral treaties that commit state-parties to afford specific standards of conduct to foreign investors from the other state-parties. These treaties grant foreign investors certain benefits, including recourse to Investor-State Dispute Settlement (ISDS) to resolve disputes with host states. Over 3,300 agreements have been concluded worldwide, including NAFTA and the Comprehensive and Progressive TransPacific Partnership.

What is Investor-State Dispute Settlement (ISDS)?
IIAs allow foreign investors (individuals and companies) to allege treaty violations by suing states through ad hoc arbitration. Arbitration tribunals are composed of party-appointed (and party-paid) private lawyers. Tribunals …

Ccsi Submits Written Views To Us Department Of State Regarding Uncitral’S Working Group Iii, Columbia Center On Sustainable Investment

Columbia Center on Sustainable Investment Staff Publications

In connection with the US Department of State’s Annual Advisory Committee on Private International law meeting in May 2019, CCSI submitted written views regarding UNCITRAL’s Working Group III on ISDS reform. CCSI’s comments highlighted specific areas of CCSI’s research as it relates to the US Government and its work within the Working Group. Specifically, US investment treaty negotiating objectives specify that covered foreign investors in the United States should not be accorded greater substantive rights than domestic investors. CCSI highlights the ways in which greater procedural rights afforded under investment treaties to foreign investors in practice result in greater substantive …

Activist Shareholders At De Facto Controlled Companies, Gaia Balp

Brooklyn Journal of Corporate, Financial & Commercial Law

Activist campaigns are likely to increasingly target controlled companies. Studies concerning activism at controlled companies focus on shareholder-empowering tools, such as the right to nominate and elect minority directors on the board, as a pathway for limiting the principal-principal agency problem. However, not enough attention has been paid to the distinction between de jure and de facto controlled companies. Building on a recent case concerning a leading Italian corporation, this Article analyzes the possible unexpected corporate governance consequences of successful activist intervention at de facto controlled companies, showing that, where minority shareholders are granted the right to appoint directors on …

Corporate Governance By Index Exclusion, Scott Hirst, Kobi Kastiel

Faculty Scholarship

Investors have long been unhappy with certain governance arrangements adopted by companies undertaking initial public offerings, such as dual-class voting structures. Traditional sources of corporate governance rules—the Securities and Exchange Commission, state law, and exchange listing rules—do not constrain these arrangements. As a result, investors have turned to a new source of governance rules: index providers.

This Article provides a comprehensive analysis of index exclusion rules and their likely effects on insiders’ decision-making. We show that efforts to portray index providers as the new sheriffs of the U.S. capital markets are overstated. Index providers face complex and conflicting interests, which …

Global Standards For Securities Holding Infrastructures: A Soft Law/Fintech Model For Reform, Charles W. Mooney Jr.

Michigan Journal of International Law

This Article outlines a “soft-law-to-hard-law” approach for the development and implementation of reforms to systems for the holding of publicly traded securities. It proposes the development of global standards for securities holding systems (“Global Standards”), to be led by the International Organization of Securities Commissions (the “IOSCO”). This approach contemplates that States would be encouraged and expected to implement the Global Standards by adopting “hard law” reforms through statutory and regulatory adjustments to their securities holding systems as well as modifications of the architecture of their securities holding systems. The successes of past IOSCO initiatives inspire this Article’s proposal, as …

Could Distributed Ledger Shares Lead To An Increase In Stockholder-Approved Mergers And Subsequently An Increase In Exercise Of Appraisal Rights?, Alyson Brown

William & Mary Business Law Review

Blockchain, the distributed ledger technology underlying cryptocurrencies like Bitcoin, is poised to revolutionize industries and processes across disciplines. In particular, government agencies and companies are looking for ways to leverage blockchain’s efficiencies to facilitate safe record-keeping. Municipalities are employing blockchain-issued deeds to accurately record property ownership. Progressive legal professionals are employing blockchainissued “smart-contracts” to more accurately record contract terms. Intellectual property attorneys and related government agencies are researching blockchain-issued copyrights and patents.

This Note examines how utilizing blockchain technology in securities trading to maintain accurate stockholder ledgers will allow for current market forces to be reflected in stockholder voting. Further, …

Alternatives To Investor-State Dispute Settlement, Lise Johnson, Jesse Coleman, Brooke Güven, Lisa E. Sachs

Columbia Center on Sustainable Investment Staff Publications

Proponents often explain support for international investment agreements (IIAs) for their ability to: (1) promote investment flows; (2) depoliticize disputes between investors and states; (3) promote the rule of law; and (4) provide compensation for certain harms to investors – objectives of varying degrees of importance to multinational enterprises, home states, host states, and other stakeholders.

While each of these objectives may seem desirable, it is important to consider what exactly they mean and whether IIAs are optimally tailored to achieve them.

This two-part series aims to consider just that. In the first blog installment, we asked of investor-state dispute …

Energy Re-Investment, Hari M. Osofsky, Jacqueline Peel, Brett H. Mcdonnell, Anita Foerster

Indiana Law Journal

Despite worsening climate change threats, investment in energy—in the United States and globally—is dominated by fossil fuels. This Article provides a novel analysis of two pathways in corporate and securities law that together have the potential to shift patterns of energy investment.

The first pathway targets current investments and corporate decision-making. It includes efforts to influence investors to divest from owning shares in fossil fuel companies and to influence companies to address climate change risks in their internal decision-making processes. This pathway has received increasing attention, especially in light of the Paris Agreement and the Trump Administration’s decision to withdraw …

Investment Treaties, Investor-State Dispute Settlement And Inequality, Lisa E. Sachs, Lise Johnson

Columbia Center on Sustainable Investment Staff Publications

International investment treaties entrench and exacerbate intra-national inequality by:

1. Providing stronger substantive legal rights to a certain class of actors that in turn strengthen the legal force of their economic rights and “expectations”, with potentially negative impacts on the competing rights and interests of other stakeholders; and
2. Providing unequal procedural rights to a certain class of actors, easing their ability, through ISDS, to challenge regulatory measures negatively impacting their economic interests, while other individuals and entities continue to face relatively high legal and practical barriers to using litigation to protect and/or enhance public interest objectives.

This Working Paper, adapted from …

Can Bad Law Do Good? A Retrospective On Conflict Minerals Regulation, Karen E. Woody

Maryland Law Review

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) created a novel approach to corporate social responsibility (“CSR”) in supply chains by requiring public companies to disclose the presence of conflict minerals in their products. Dodd-Frank, as a whole, has faced a barrage of criticism since its passage, and Section 1502 was not immune from intense critical backlash. As I argued in prior scholarship and congressional testimony, Section 1502 was ill-conceived in substance and form. Its application resulted in the improper use of securities laws to the detriment of its laudable public international law …

Revolving Elites: The Unexplored Risk Of Capturing The Sec, Randall S. Thomas, James D. Cox

Vanderbilt Law School Faculty Publications

Fears have abounded for years that the sweet spot for capture of regulatory agencies is the “revolving door” whereby civil servants migrate from their roles as regulators to private industry. Recent scholarship on this topic has examined whether America’s watchdog for securities markets, the Securities and Exchange Commission (“SEC”), is hobbled by the long-standing practices of its enforcement staff exiting their jobs at the Commission and migrating to lucrative private sector employment where they represent those they once regulated. The research to date has been inconclusive whether staff revolving door practices have weakened the SEC’s verve. In this paper, we …

The Stock Exchange As Multi-Sided Platform And The Future Of The National Market System, Steven Mcnamara

BYU Law Review

Since Regulation National Market System (Regulation NMS) came into force a decade ago, computer technology has transformed the stock markets. While Regulation NMS benefited investors by lowering stated transaction costs, it also created today’s complex and fragmented trading system. An increasing amount of trading now occurs off-exchange in dark pools and other “non-lit” venues, and hidden costs proliferate. In addition to the profits taken by high-frequency traders, these include the defensive costs of the technological arms race, the possibility of another “Flash Crash,” public suspicions of “rigged” stock markets, reduced allocative efficiency, and rising proprietary data fees paid by stockbrokers …

Securities Disclosure As Soundbite: The Case Of Ceo Pay Ratios, Steven A. Bank, George S. Georgiev

Articles

This Article analyzes the history, design, and effectiveness of the highly controversial CEO pay ratio disclosure rule, which went into effect in 2018. Based on a regulatory mandate contained in the Dodd-Frank Act of 2010, the rule requires public companies to disclose the ratio between CEO pay and median worker pay as part of their annual filings with the Securities and Exchange Commission (SEC). The seven-year rulemaking process was politically contentious and generated a level of public engagement that was virtually unprecedented in the long history of the SEC disclosure regime. The SEC sought to minimize compliance costs by providing …

Disclosure's Purpose, Hillary A. Sale

Georgetown Law Faculty Publications and Other Works

The United States securities regulatory infrastructure requires disclosure of a wide array of information both by and about covered companies. The basic purpose of the disclosures is to level the playing field – for investors, for issuers, and for the public. Although investor protection is the disclosure goal often touted, this article develops the purposes of disclosure extending beyond investors to issuers and the public. Indeed, the disclosure system is designed to level the playing field for issuers— addressing confidentiality concerns, for example. In addition, the system helps to promote confidence in the markets, which, in turn, enables growth and …

Crowdfunding In Arkansas? Yes, You Can!, Carol Goforth

Arkansas Law Notes

Following enactment of the Jumpstart Our Business Startups Act (also known as the JOBS Act) in 2012, the SEC expanded the options for issuers seeking an exemption from the registration requirement for the sale of securities under federal law, while simultaneously preempting inconsistent state law. One such innovation was Regulation Crowdfunding, generally referred to as Reg. CF, which currently allows compliant issuers to raise up to $1,070,000 in any 12-month period by seeking relatively small investments from a large number of investors.

The Lehman Brothers Bankruptcy F: Introduction To The Isda Master Agreement, Christian M. Mcnamara, Andrew Metrick

Journal of Financial Crises

When Lehman Brothers Holdings, Inc. (LBHI) sought Chapter 11 protection, the more than 6,000 counterparties with which its subsidiaries had entered into over 900,000 over-the-counter (OTC) derivatives transactions faced the question of how best to respond to protect their interests. The existence of standardized documentation developed by the International Swaps and Derivatives Association (ISDA) for entering into such transactions meant that the counterparties likely thought that they were dealing with a well-defined and robust set of options in answering this question. Yet, in practice, the resolution of Lehman’s OTC derivatives portfolio ended up being less orderly than the existence of …

The Lehman Brothers Bankruptcy E: The Effects On Lehman’S U.S. Broker-Dealer, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Lehman’s U.S. broker-dealer, Lehman Brothers Inc. (LBI), was excluded from the parent company’s bankruptcy filing on September 15, 2008, because it was thought that the solvent subsidiary might be able to wind down its affairs in a normal fashion. However, the force of the parent’s demise proved too strong, and within days, LBI and dozens of Lehman subsidiaries around the world were also in liquidation. As a regulated broker-dealer, LBI was required to comply with the Securities and Exchange Commission financial-responsibility rules for broker-dealers, including maintaining customer assets separately. However, the corporate complexity and enterprise integration that characterized the Lehman …

Innovative Financing Solutions For Community Support In The Context Of Land Investments, Sam Szoke-Burke

Columbia Center on Sustainable Investment Staff Publications

Communities affected by agricultural, forestry, and other resource investments urgently need increased funding for legal and technical support. Without support, communities risk losing access to critical land and resources, suffering human rights violations, or missing opportunities to benefit from investments. A lack of community support can also lead to conflict and challenges that are damaging for companies and host governments.

Donors and support providers have found ways to finance support for communities, but such efforts can only extend so far. Promising new opportunities exist for filling the financing gap, yet they will require sustained efforts by a range of actors. …

Alpha Duties: The Search For Excess Returns And Appropriate Fiduciary Duties, Ian Ayres, Edward Fox

Articles

Modern finance theory and investment practice have shifted toward “passive investing.” The current consensus is that most savers should invest in mutual funds or ETFs that are (i) well-diversified, (ii) low-cost, and (iii) expose their portfolios to age-appropriate stock market risk. The law governing trustees, investment advisers, broker–dealers, 401(k) plan managers, and other investment fiduciaries has evolved to push them gently toward this consensus. But these laws still provide broad scope for fiduciaries to recommend that clients invest instead in specific assets that they believe will produce “alpha” by outperforming the market. Seeking alpha comes at a cost, however, in …

Enforcing Public Takeover Regulation: Reconciling Public And Private Interests, Wai Yee Wan

Research Collection Yong Pung How School Of Law

Takeover regulation in the UK, Hong Kong and Singaporerelies on takeover codes and takeover panels. However, parties aggrieved by thedecisions of the panels may sometimes challenge them in the courts, giving riseto the potential of overlapping jurisdictions. The problem is compounded by twofactors: the enforcement of the takeover codes can have substantiveimplications on the parties’ ability to enforce their rights in courts, and takeoverpanels and courts assess matters differently. This article argues that thereneeds to be a clearer delineation between the potentially overlappingjurisdictions of the takeover panels and the courts.