If Not the Index Funds, Then Who?

By Nathan Atkinson August 15, 2019 by renholding

In recent years, large asset managers have reached incredible sizes, managing trillions of dollars of assets on behalf of tens of millions of clients. The largest three – BlackRock, Vanguard, and State Street – taken together (the “Big Three”), vote …

Davis Polk Discusses UK Serious Fraud Office’s New Cooperation Guidance

By Greg D. Andres, Angela T. Burgess, Neil H. MacBride, Tatiana R. Martins and Paul J. Nathanson August 15, 2019 by renholding

On August 6, the United Kingdom’s Serious Fraud Office (“SFO”) published new guidance on the steps companies should take in order to receive cooperation credit in the SFO’s charging decisions. The document, titled “Corporate Co-operation Guidance” (the “SFO Guidance”),[1]…

Fintech and Banking

By Anjan V. Thakor August 14, 2019 by renholding

In a recent paper, I review the literature on fintech and its interaction with banking. Included in fintech are innovations in payment systems (including cryptocurrencies), credit markets (including peer-to-peer or “P2P” lending), and insurance, with blockchain-assisted smart contracts playing a …

Do Fiduciary Duties Matter?

By A. Joseph Warburton August 13, 2019 by renholding

Do fiduciary responsibilities have any effect on the behavior of firm insiders? In a series of studies, I find empirical evidence that stronger fiduciary duties reduce managerial risk taking. And that is not all. The evidence indicates that stronger fiduciary …

Wachtell Lipton Puts a Spotlight on Boards

By Martin Lipton August 13, 2019 by renholding

The ever-evolving challenges facing corporate boards prompt periodic updates to a snapshot of what is expected from the board of directors of a major public company—not just the legal rules, or the principles published by institutional investors and various corporate …

The Readability of Company Responses to SEC Comment Letters

By Cory A. Cassell, Lauren M. Cunningham and Ling Lei Lisic August 12, 2019 by renholding

The Securities and Exchange Commission published its Plain English Handbook in 1998 with a goal of promoting “clearer and more informative disclosure documents” (SEC 1998). Warren Buffet authored the preface, where he states, in part:

For more than forty years, …

SEC Commissioner Peirce Addresses the American Chamber of Commerce in Japan

By Hester M. Peirce August 12, 2019 by renholding

It is an honor to be with you today [August 7, 2019]. I have long wanted to visit Japan. Indeed, one of the options I explored following college was coming to Japan to teach English. Instead I ended up in

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Institutional Shareholders: Friends or Foes of Banks?

By Emmanuel T. De George, Nayana Reiter, Christina Synn and Christopher D. Williams August 9, 2019 by renholding

Following the financial crisis, regulators, academics, and practitioners investigated the factors that contributed to the systemic failure of the financial system. An important dimension of systemic risk that was identified is the correlated movements in market prices among banks during …

Is the Cost of Equity Greater than the Risk-Free Rate?

By J.B. Heaton August 8, 2019 by renholding

As a matter of abstract financial-economic theory, the cost of equity is straightforward. It is the minimum expected return investors require to hold the firm’s equity at the current price. Financial economists may disagree on the best way to estimate …

Cadwalader Discusses CFIUS and Foreign Investor Deals

By Joseph Moreno, Jodi Avergun, Andrew Alin, Joshua Apfelroth, and Keith Gerver August 8, 2019 by renholding

The national security implications of corporate deals involving foreign investors continues to be a headline-grabbing topic. Last summer, President Trump signed into law the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which expanded the types of …

Riding the Mania of Blockchain: Public Firms’ Speculative 8-K Disclosures

By Stephanie F. Cheng, Gus De Franco, Haibo Jiang and Pengkai Lin August 7, 2019 by renholding

The price of Bitcoin, a cryptocurrency based on blockchain technology, increased dramatically from less than a penny when it was launched in 2009 to $900 in January 2017 and peaked at over $19,500 in December 2017. This rise coincided with …

Finding Friends Is Hard: Long-Term Investors’ Relationship with Proxy Advisers, Activists, and Equity Funds

By Neil Whoriskey August 7, 2019 by renholding

Institutional investors are howling for US public companies to focus more on the long-term.^[1] This is unsurprising. Long-term focused companies produce significantly better results over time, reporting far greater revenue growth with less volatility, far higher levels of economic …

Analysts’ and Managers’ Use of Humor on Public Earnings Conference Calls

By Andrew C. Call, Rachel W. Flam, Joshua A. Lee and Nathan Y. Sharp August 6, 2019 by renholding

We investigate whether the use of humor during public earnings conference calls influences the content and outcomes of the calls. Earnings releases are key events for corporations and the investors and analysts who follow them. In conjunction with the earnings …

SEC Commissioner Discusses Cross-Border Cooperation in Digital-Asset Regulation

By Hester M. Peirce August 6, 2019 by renholding

Thank you, Robby [Greene], for that kind intro. I am delighted to see that Robby, once my research assistant, has clearly gone on to bigger and better things. I also am delighted to be here in Singapore, by some accounts

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ICO vs. IPO: Empirical Findings, Information Asymmetry, and the Appropriate Regulatory Framework

By Moran Ofir and Ido Sadeh August 5, 2019 by renholding

Initial coin offerings (ICOs) are a new form of fundraising whereby blockchain-related ventures raise public capital in exchange for newly issued digital tokens. The issued tokens may represent a variety of rights, ranging from financial rights – such as dividend …

ISS Discusses Director Overboarding: Global Trends, Definitions, and Impact

By Kosmas Papadopoulos August 5, 2019 by renholding

In the 2019 proxy season, “overboarding” became a center-stage issue for many companies and investors. Several large asset managers, including Vanguard, BlackRock, and LGIM, enhanced their voting guidelines to apply stricter criteria, while some directors serving on multiple public company …

The Potential Rewards for Blowing the Whistle on Wall Street Just Went Up

By Ezra Bronstein August 2, 2019 by renholding

As an incentive to blow the whistle, the Securities and Exchange Commission awards tipsters who supply credible information resulting in successful enforcement actions up to 30 percent of monetary penalties paid by securities violators. The unique features of the program …

SEC Chairman Clayton Speaks to Fixed-Income Committee

By Jay Clayton August 2, 2019 by renholding

Thank you, Michael [Heaney]. Good morning everyone. Thank you all for being here. I want to extend a warm welcome to our newest Commissioner, Allison Lee — Welcome back to the Commission and to your first FIMSAC meeting. We have

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Toward a Mission Statement for Mutual Funds in Shareholder Litigation

By Sean J. Griffith and Dorothy S. Lund August 1, 2019 by renholding

Mutual funds own approximately 30 percent of the U.S. equity market, and the Big Three fund families – Blackrock, Vanguard, and State Street – are the largest blockholders in the vast majority of large, publicly traded companies. This has made …

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The CLS Blue Sky Blog

Columbia Law School's Blog on Corporations and the Capital Markets

August 2019