The Impact of Liquidity Regulation on Broker-Dealer Stability

By | October 17, 2019

Courtesy of Marco Macchiavelli and Luke Pettit At the peak of the cycle in 2006, broker-dealers (dealers hereafter) were involved in originating, distributing and financing mortgage-related instruments, which exposed them to significant risks at the turn of the housing cycle in early 2007. To make things worse, they were financing a significant portion of these… Read More »

Does Board Independence Reduce Informed Short Selling Prior to Earnings Announcements? Evidence from Quasi-Natural Experiment

By | October 16, 2019

Courtesy of Suchismita Mishra, Anisur Rahman, and Arun Upadhyay In a new paper, we argue that the transparency created by independent boards prevents informed short sellers from taking advantage of nonpublic information, and thus results in a lower likelihood of surprise predictions of informed short selling prior to upcoming earnings announcements. Short sellers—those who sell… Read More »

Regulating Federal Securities Law Claims In Corporate Charters: The Dilemma Confronting Delaware

By | October 14, 2019

Courtesy of Mohsen Manesh In Sciabacucchi v. Salzberg, the Delaware Supreme Court confronts a thorny question at the intersection of state corporate law and federal securities law. Specifically, the case asks whether a Delaware corporation may include a forum selection provision in its corporate charter governing shareholder claims brought under federal securities law. But that narrow… Read More »

Not Everything is About Investors: The Case for Mandatory Stakeholder Disclosure

By | October 10, 2019

Courtesy of Ann Lipton Businesses that operate in the United States are constantly required to disclose information. Both state and federal law require merchants to disclose product and service information to consumers.  Federal law requires employers to disclose workplace hazards to employees.  Data on the racial and gender makeup of a firm’s workforce must be… Read More »

Building Fintech Ecosystems: Why Regulatory Sandboxes Tend to Get the Plaudits and Innovation Hubs Do the Work of Promoting Development, Innovation and Competition in Financial Services

By | October 8, 2019

Courtesy of Ross Buckley, Douglas Arner, Robin Veidt, and Dirk Zetzsche Regulatory sandboxes are the flavor of the month. Over 50 countries have now established or announced a “financial regulatory sandbox” since the UK Financial Conduct Authority established the first one in 2016. Sandboxes are safe spaces in which FinTech start-ups and other innovative enterprises… Read More »

Deal or No Deal? Brexit Implications for UK/EU Financial Services Firms

By | September 16, 2019

Courtesy of Mete Feridun In March 2018, the UK and EU27 reached an agreement on the terms of a transitional period following the UK’s withdrawal from the EU. However, the terms of this deal are conditional on both sides agreeing to a final withdrawal treaty (“Withdrawal Agreement”).  Since Boris Johnson’s ascension to Prime Minster in July, this prospect has grown increasingly unlikely,… Read More »

Danske Bank Money Laundering Case Study

By | September 11, 2019

Courtesy of Lee Reiners and Joseph A. Smith Jr. This case study draws primarily—and in some instances quotes verbatim—from the “Report on the Non-Resident Portfolio at Danske Bank’s Estonian Branch” prepared for the Bank on September 19, 2018, by the law firm Bruun & Hjejle.[1] Additional details are derived from other sources, including Danske Bank… Read More »

Can Technology Undermine Macroprudential Regulation: Evidence from Marketplace Lending in China

By | September 10, 2019

Courtesy of Alberto Manconi, Fabio Braggion, and Haikun Zhu The Global Financial Crisis led economists and regulators to refocus on the relationship between household leverage and macroeconomic performance. The ensuing debate has revolved around how best to contain household debt using a variety of approaches, with much emphasis being placed on loan-to-value (LTV) caps, i.e.… Read More »

Regulators Should be More Prescriptive About the Quantification of Cyber Risks

By | September 5, 2019

Courtesy of Mete Feridun* Although operational risk capital requirements drive a substantial proportion of banks’ capital requirements, quantification of cyber incidents still represent a relative “backwater” of the ever-evolving global regulatory framework. Surprisingly, the new “Basel IV” operational risk framework does not include any specific reference to cyber risks. While regulators expect firms to integrate… Read More »

Dual-Class Stock Structures and Society

By | August 26, 2019

Courtesy of Martin Chang* Issuing multiple classes of stock is a strategy that corporations have used to insulate insiders from outside investor pressure. Each class of stock can differ in a variety of ways, but the most common difference is the number of votes that each share is entitled to. By creating different classes, each… Read More »