Should governments be relying on corporate and securities law to promote humanitarian goals? This is the question that naturally arises when viewing the SEC’s Conflict Minerals Payment Rule, which requires corporations to disclose their conflict mineral usage as a means of curtailing the violence in the Congo. Yet the US is not alone in its reliance on disclosure mechanisms in corporate or securities laws to promote non-economic goals. The Danish government uses disclosure to promote gender parity on boards of directors; France relies on it to curb greenhouse gas emissions, and India uses it as a method for curtailing energy … Read more
A new type of warfare is upon us. In this new mode of war, finance is the most powerful weapon, bullets are not fired, financial institutions are the targets, and almost everyone is at risk. Instead of smart bombs, improvised explosives, and unmanned drones –– economic sanctions, financial restrictions, and cyber programs are the weapons of choice. This is the new reality of modern financial warfare.
The armaments of modern financial warfare are as vast, diverse, and important as the myriad of ways to raise and move money. Broadly, the financial weapons of war can be divided into analog weapons … Read more
Academics who profess expertise in corporate governance sometimes find themselves on very strange turf. That has been my status for the last two years, serving as an adviser to the U.S. Commerce Department in connection with the Obama Administration’s efforts to “privatize” the Internet Corporation for Assigned Names and Numbers (“ICANN”). ICANN is the non-profit entity that essentially manages the Internet’s domain name functions and oversees much of its internal plumbing. This privatization effort has now been challenged in Congress by Senator Ted Cruz and others, and political fireworks are likely. But let’s start at the beginning. In March … Read more
Reinsurance can be understood as simply insurer’s insurance. Under an insurance contract, a policyholder is protected from loss by transferring risk to an insurer; analogously, under a reinsurance contract, an insurer (the cedent or ceding company) is protected from exposure by transferring risk to a reinsurer. Insurers have an increasing demand for more financial capacity when underwriting catastrophic risks. The Cologne Reinsurance Company was the first professional reinsurance company, founded in 1842 following a catastrophic fire in Hamburg the same year. For over a century, reinsurance has been the preferred vehicle to shed primary insurers’ catastrophe risk exposure. For example, … Read more
On June 16, 2016, the US Securities and Exchange Commission (“SEC”) issued a proposed rule (available here), which, if adopted, would result in a revamp of its disclosure requirements for mining company issuers. The proposed rule is intended to harmonize the SEC’s mining property disclosure requirements with current industry and global regulatory practices and standards. The SEC is seeking comments on all aspects of the proposal. Initial comments are due 60 days after the proposed rule is published in the Federal Register.
The key changes proposed for mining companies are:
- requiring the disclosure of mineral resources (currently prohibited under
Attackers last February reportedly stole $81 million from the Bangladesh Central Bank by obtaining and exploiting the bank’s credentials for the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. The attack – one of the biggest bank robberies in history – exploited weaknesses in cyber, fraud, and possibly insider threat controls, illustrating the need for banks to combine financial crime risk areas that were previously either siloed, or at best tenuously connected.
Specifically, the attackers exploited cyber weaknesses by designing custom malware tailored to bypass controls and network logging systems used by the Bangladesh Central Bank. The attackers also … Read more
Much has been written and spoken in the immediate aftermath of the UK’s EU referendum about what the UK must do to leave the EU. We look at the key questions in this area, such as whether the UK has yet decided to withdraw, what it must do to withdraw, whether it can change its mind, and the position of Scotland.
What is the mechanism for leaving the EU?
The mechanism for the UK’s leaving the EU is set out in article 50 of the Treaty on European Union (see Box 1, overleaf). For withdrawal, article 50 requires:
- A decision
The Brent and WTI prices of crude oil fell by 60% between June 2014 and January 2015, marking one of the fastest and largest declines in oil history. Several potential factors (related to oil supply and demand) which could have influenced this oil price decline were discussed in an extensive World Bank policy research note by Baffes, Kose, Ohnsorge, and Stocker (2015). However, Tokic (2015) and a Bank of International Settlements report (Domanski, Kearns, Lombardi, and Shin, 2015) showed that production and consumption alone are not sufficient for a fully satisfactory explanation of the collapse in oil prices. Particularly, Domanski, … Read more
The UK voters’ decision to exit the EU came as a surprise to many observers, as well as the markets, with the “Leave” campaign even hinting at defeat as the polls closed. The Wall Street echo chamber view that it would make no sense in the end for the UK to leave was just that. The vote has unleashed political, economic, and financial uncertainty that will play out over the months ahead with attendant risk premia rising for affected currencies, equity and fixed income markets, sectors, and individual firms. Market values for banks, insurance companies, and asset managers dropped Friday … Read more
Corporate expatriations – transactions that lead a U.S. company to become the subsidiary of a foreign parent – present two problems for the U.S. Internal Revenue Service (I.R.S.). First, they give expatriated companies the opportunity to use tax minimization strategies to avoid taxes; second, they erode the U.S. corporate tax base. Though both actions are driven by idiosyncrasies in U.S. tax treatment of foreign income, they spring from different motivations, and lead to different kinds of harm. Tax minimization involves exploiting differences in national tax laws to shield income from arguably legitimate U.S. tax obligations, while tax base erosion involves … Read more
Moody’s, S&P and Fitch represent an oligopoly in the credit rating business, accounting for 94 percent of the global market (Candelon et al., 2014) and for about 96.5 percent of all the outstanding ratings in U.S. The three agencies are key players in financial markets as they assess the credit worthiness of almost any debt issuer including governments, firms, municipalities and financial institutions. Moody’s, S&P and Fitch heavily affect corporate financing through ratings assigned to corporate debt. The economic literature has shown that bond ratings are strongly correlated with private bond yields (Hand et al., 1992; Hite and Warga, … Read more
Target firms typically employ either an auction or a negotiation method during merger negotiations. In auction deals, the pre-public takeover process involves contacting several potential bidders, signing confidentiality/standstill agreements and accepting private bids. In negotiation deals however, the target engages with only one bidder in the pre-public takeover process. Using either selling method, the target board negotiates with the bidder(s) and if an acceptable price is obtained from a bidder, a definitive merger agreement is signed and a public announcement is made. Typically, after the public announcement of a merger agreement, target boards do not actively solicit new bids although … Read more
There has been tension between the legal academy and the practising profession ever since law was first taught in university law schools in the 19th century. The sense of unease arose because of uncertainty as to whether the primary role of a law school was to train lawyers for practice or to ensure that law was accepted as an independent scholarly discipline appropriate for a university, like history or philosophy. Universities feared that law schools might turn out to be mere trade schools while practitioners feared that an exclusive focus on liberal education would fail to produce skilled practitioners.… Read more
After the July 4th weekend, Reynolds Holding will be taking over as the fourth editor-at-large of the CLS Blue Sky Blog. It has been a remarkable year and a half, and I am confident our Blog will continue to grow in the coming years. I am grateful to the faculty committee (Professors Jack Coffee, Ed Greene, Robert Jackson and Kate Judge), the student editors (Jennifer Barrows, AJ Farkas and John Knight) as well as Columbia Law School for providing opportunity and support. I intend to continue writing as time allows and invite you to visit my webpage. I believe … Read more
Innovative businesses in the financial services industry looking to test exciting new financial products and services able to apply to the UK’s regulatory sandbox.
The “regulatory sandbox” is the next step for the Financial Conduct Authority (FCA) as part of Project Innovate, a programme that commenced in October 2014 aiming to remove unnecessary barriers to innovation for businesses involved in banking and finance in the United Kingdom. The sandbox marks a significant leap forward in financial services regulation and is the first of its kind, globally. With the launch of Project Innovate, and now the sandbox, the FCA has positioned … Read more
EU financial policymakers appear to be once more in a deadlock situation over proposals to limit the sovereign risk exposure of European banks. The strong exposure of some banks in the southern European periphery in their national sovereign’s debt was seen by many as one of the contributing factors to the ongoing sovereign debt crisis (Acharya et al. 2014, Beltratti & Stulz 2015; Brunnermeier et al. 2016). Powerful incentives have encouraged financial institutions to buy and hold government bonds in the past (Gros 2013). In fact, this was the intellectual background for the policy framework known as the Banking Union, … Read more
On May 5, 2016, the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) announced sanctions against 77 entities and individuals associated with the Waked Money Laundering Organization (“Waked MLO,” collectively, the “Waked Sanctions”). OFAC stated that the designation was necessary to disrupt the organization’s alleged activities in laundering drug trafficking proceeds by using trade-based methods, duty-free retail, real estate development and financial services throughout the region.
In coordination with the Drug Enforcement Administration (DEA), Customs and Border Protection and the Miami Division of the Federal Bureau of Investigation, OFAC stated that it determined that the Waked MLO uses … Read more
Customers sure love Uber. If you ask them to describe their experience with the ride-share firm, most Uber passengers will gladly tick off a long list of superlatives: Innovative! Economical! Revolutionary!
But a less-flattering picture of Uber has recently surfaced in courtrooms across the country. Told by aggrieved drivers, this countervailing narrative depicts Uber as a company that cheats its workers out of wages and denies them basic workplace rights. In fact, earlier this year, Uber agreed to pay upwards of $100 million to drivers in California and Massachusetts for alleged employment law violations.
So which is it? Is Uber … Read more
Unlike most other countries, the U.S. taxes corporations on earnings generated anywhere in the world. This means that U.S. corporations have a strong tax incentive to renounce their U.S. incorporation and redomicile in a foreign country. Enter the inversion, a legal maneuver that has become increasingly popular and politicized in recent years, most notably with the announcement of Pfizer’s plan to move to Ireland as part of its acquisition of Allergan. Although recent rule changes by the Treasury has caused Pfizer to abandon this plan for the moment, inversions will continue to occur because of the tax benefits to the … Read more
|Rank||Name||School||Citations||Age in 2016|
|1||John Coffee, Jr.||Columbia University||1470||72|
|2||Lucian Bebchuk||Harvard University||1130||61|
|3||Stephen Bainbridge||University of California, Los Angeles||1010||58|
|4||Reinier Kraakman||Harvard University||820||67|
|5||Stephen Choi||New York University||780||50|
|6||Donald Langevoort||Georgetown University||770||65|
|7||Ronald Gilson||Columbia University||760||70|
|8||Lynn Stout||Cornell University||750||59|
|9||Roberta Romano||Yale University||730||64|
|10||Henry Hansmann||Yale University||720||71|
|11||Bernard Black||Northwestern University||630||63|
|12||James Cox||Duke University||620||73|