In a recent paper, we explore how globalization has affected the operation of securities markets and the challenges this poses for their regulation. The paper is part of the first phase of the New Special Study of the Securities Markets Project.
Securities markets have experienced unprecedented levels of cross-border activity over the past 30 years. Three secular trends have contributed to this phenomenon of globalization. First, liberalization: the removal of national foreign exchange controls and barriers to trade and investment. Second, the growth of collective investment, encouraged by favorable tax treatment of retirement saving. This has fostered a shift … Read more
On November 2, 2017, President Maduro of the Bolivarian Republic of Venezuela announced the creation of a presidential commission, headed by Vice President El Aissami, for the “refinancing and restructuring” of Venezuela’s external debt, estimated at between US$100-150 billion.1 Foreign creditors have been invited to a meeting on November 13, 2017 in Caracas with Mr. El Aissami to start negotiations.
On November 3, 2017, the government of Venezuela announced its “absolute and responsible commitment to continue upholding the obligations [of Venezuela and Petróleos de Venezuela, S.A. (PdVSA)].”2 At the same time, PdVSA reported that it had executed a … Read more
Although China seems to have taken far longer than Western developed nations such as the UK, the U.S., and Germany to create a modern corporate system, the imperial Qing government promulgated as early as 1904 a corporate law that included rules on limited liability and equal treatment of shares. Why then did it take another century for a mature corporate law and governance system to emerge?
Throughout 150 years of corporate evolution in China, the government has to varying degrees played an active and dominant role. It exercised complete control at the start of the late Qing Dynasty (1860-1911) but … Read more
The UK Financial Conduct Authority (the “FCA”) has published changes to the Conduct of Business sourcebook (“COBS”) to boost the transparency of the IPO process and tackle conflicts of interest that may arise from the interaction between an issuer and analysts of the syndicate banks. The changes, published in the FCA’s Policy Statement PS17/23 (the “Policy Statement”) on 26 October 2017, broadly crystallise the FCA’s proposals that were outlined in its consultation paper launched on 1 March 2017 (see our client update, “UK Regulator Proposes Changes to IPO Process”, dated 16 March 2017). The primary goal of the … Read more
On November 8, 2017, a bipartisan group of lawmakers introduced a long-awaited bill that could significantly alter the process by which the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) reviews foreign investment in the United States.
The proposed Foreign Investment Risk Review Modernization Act of 2017 (“FIRRMA”) would modernize the CFIUS review and approval process, which has struggled to keep pace with a surge of foreign investment in the United States over the last several years. If passed, the bill would revamp the CFIUS review process and update the regulations to address the national … Read more
On October 1, 2017, new international investment arbitration trial rules (Chinese version) (the “Rules”) issued by the China International Economic and Trade Arbitration Commission (“CIETAC”) became effective. The Rules mark China’s first attempt to establish a domestic arbitral institution for international investment disputes. The Rules come at the same time as China’s “Belt and Road” initiative, focusing on improving trade infrastructure on land from China to other countries in Asia, securing efficient sea trade routes and establishing a network of free trade zones and cultural exchanges. CIETAC may become the forum of choice for Chinese investors in future arbitrations with … Read more
Takeover transactions are often the most significant activity affecting corporations and their shareholders. Accordingly, there are intense debates about the value and impact of takeovers and the extent to which law should regulate such transactions. One area of focus for takeover regulation has been the potential impact of takeovers on minority shareholders. The focus on minority shareholders is not surprising as research suggests that laws which protect minority shareholders are associated with stronger financial markets.
In a recent book chapter, I focus on how deal structures affect the protection of minority shareholders in two common law jurisdictions, the U.S. and … Read more
In the last few years, a source of financing for start-ups, known as crowdfunding, has become widely available. It involves raising capital from a large number of individuals, each of whom typically contributes a small sum. The internet has lowered the costs of crowdfunding by facilitating the dissemination of information about small projects, and its use has grown exponentially, with some $34 billion being raised worldwide through crowdfunding in 2015 alone.
While the availability of crowdfunding is clearly good news for entrepreneurs, its merits for those providing the funding are less certain. Because funders typically put only small sums into … Read more
With institutional shareholders playing a growing role in corporate governance, dialogue between boards and shareholders is increasingly common in the U.S. and Europe. Talking with boards is essential to institutional investors’ stewardship functions, and engaging with institutional investors has become a focus of listed companies’ communication strategies. Empirical analysis shows that private discussions with directors have become institutional investors’ preferred method of engagement, and they resort to shareholder proposals, public criticism, and similar practices only if private conversations fail.
Nevertheless, meetings between directors and institutional investors raise legal concerns in the U.S. and the EU, because they may lead to … Read more
On September 27, President Trump, the House Committee on Ways and Means and the Senate Committee on Finance released their framework for tax reform (the “framework”), which represents the most detailed proposal for changes to the tax code issued during the Trump administration. The framework’s key elements include:
- a reduction in corporate tax rates to 20% and partial limitation on the deductibility of interest for corporate taxpayers;
- a shift to a modified “territorial” regime of corporate taxation that eliminates tax on dividends from foreign subsidiaries but subjects all foreign earnings to current taxation at a minimum rate to be determined;
… Read more
In the last two decades, anti-corruption has become a global norm, as the OECD and the United Nations have made clear in adopting anti-corruption conventions. As a result, combatting corruption in international business has joined upholding human and labor rights and protecting the environment as major aims of corporate social responsibility. Currently, however, anti-corruption responsibilities only require corporations to think about avoiding direct involvement in a corrupt transaction. In an article forthcoming in the Wisconsin Law Review, I argue that corporations’ responsibility to combat corruption extends beyond a duty to avoid paying bribes and requires corporations to fight corruption … Read more
On September 13, 2017, the European Commission issued a proposed Regulation establishing a framework for screening foreign investments into the European Union. The Commission also issued an explanatory memorandum and a communication to the European Parliament and other relevant EU bodies providing background about the proposed Regulation and suggesting a number of complementary measures.
The Regulation, if adopted in its proposed form, would authorize (not require) EU member states to maintain mechanisms to screen foreign direct investments on the grounds of security or public order, and would also authorize the Commission itself to screen foreign direct investments that … Read more
The degree to which business participants ought to be free to limit or eliminate fiduciary duties and associated liabilities remains a hotly contested matter in many jurisdictions. In a new chapter forthcoming in Edward Elgar’s Research Handbook on Fiduciary Law, I explore the extent of contractual freedom to opt out of the fiduciary governance paradigm in U.S. and U.K. business entities, including the U.S. corporation, general partnership, limited partnership, limited liability partnership, and limited liability company, and the U.K. limited company, general partnership, limited partnership, and limited liability partnership. I then consider potential explanations for observed divergences between two … Read more
Throughout the 1990s, the Big 5 accounting firms made a concerted effort to enter the legal services market. By the close of the twentieth century, legal networks directly owned or closely affiliated with the Big 5 were major players in many markets around the world, and were threatening to enter those like the United States from which they were still barred. However, after the wave of accounting scandals arising out of the 2001 financial crises—scandals that brought down Arthur Andersen and ushered in regulatory reforms in the United States and other major economies that appeared to place severe restrictions on … Read more
On July 27 of this year, Andrew Bailey, chief executive of the UK Financial Conduct Authority (FCA), delivered a speech in which he questioned the sustainability of the London Interbank Offered Rate (LIBOR) in its current form. The FCA has regulated LIBOR since April 2013 and while significant improvements have been made to LIBOR during that time, the continuing decline in liquidity in interbank unsecured funding markets has undermined confidence in the reliability of LIBOR. The message, in essence, is that the underlying market is not robust enough to allow the determination of LIBOR to be based on actual transactions. … Read more
On 29 August 2017, the UK Government published its response to the green paper on corporate governance reform that it issued at the end of November 2016. It intends to implement its reform proposals — so that they apply to accounting periods starting after June 2018 — by a mixture of secondary legislation and changes to the UK Corporate Governance Code (the “Governance Code”) coupled with the preparation of new guidance and certain other initiatives in related areas. Except for foreign premium-listed companies which may be affected by the Governance Code changes, the reforms (including the CEO pay ratio reporting) … Read more
Since the June 8 election in Britain, which saw the Prime Minister lose her majority in Parliament, there has been much speculation as to whether the British government would continue down the road of a “hard” Brexit or would move to a softer version of the “no deal is better than a bad deal” position that dominated the headlines for much of the spring. In the past few weeks, while continental Europe focused on other issues and vacations, the political class and the media in Britain were left to read between the lines as competing visions of Brexit, with a … Read more
On Wednesday, August 2, 2017, President Donald Trump signed into law the Countering America’s Adversaries Through Sanctions Act (the Act). The Act significantly expands and codifies US sanctions targeting Russia, and it adds several measures to the already comprehensive US sanctions on Iran and North Korea. The Act passed both houses of Congress last week, with a vote of 419-3 in the House of Representatives and 98-2 in the Senate.
The Act is particularly significant because it codifies many of the Russia-related sanctions measures introduced by President Obama through executive orders, effectively requiring President Trump to secure Congressional approval before … Read more
The May 2017 WannaCry ransomware attack affected more than 200,000 computers spread across 150 nations. The results of the attack made clear that computers whose software is not up to date can hurt not only the computers’ owners, but ultimately the larger internet ecosystem. This fact was brought into harsh relief a month later, when perpetrators of the NotPetya attack used the same vulnerability as WannaCry.
Spurred on by such attacks, more firms are viewing cybersecurity as essential to corporate social responsibility (CSR). Some contend that cybersecurity promotes human rights, on and offline, by protecting privacy, free expression, and the … Read more
Brexit has set the stage for a retaliatory trade war that neither the U.K. nor the E.U. wants and that will injure consumers (and others) on both sides. Moreover, it could threaten the U.S. as well, if it leads the U.K. to relax its financial regulatory requirements and return to its former “regulatory-lite” policies in order to compete more effectively (and thereby lead a regulatory race to the bottom).
In a paper just posted on SSRN (available here) that I deliver at the University of Paris/Sorbonne in two weeks, I analyze how trade wars begin and play out, applying … Read more