Columbia Law School
Sky Blog
Today [October 28], we are considering a new rule to provide an updated and comprehensive regulatory framework for the use of derivatives by registered investment funds, including mutual funds and exchange traded funds (ETFs). I have spoken before on the
mutual funds
The Politics of Institutional Shareholder Voting: Transparency Before Reform
On July 22, the SEC finalized a sweeping rule change to enhance the transparency around the role of proxy advisers. This follows an earlier proposal to reform the process for including shareholder proposals in a company’s proxy statement.[1] These …
The Competitive Landscape of the Proxy Advice Market
Despite long-standing efforts to understand the proxy advice market, there is no way to identify the firms that supply specific investors with proxy advice, making claims about market shares conjectural at best. Nevertheless, it is widely believed that ISS and …
Shareholder Satisfaction with Overlapping Directors
We investigate whether mutual fund shareholders are particularly supportive of “overlapping directors,” individuals who serve simultaneously on at least one corporate board and at least one mutual fund board. Overlapping directors may have a conflict of interest because of their …
Toward a Mission Statement for Mutual Funds in Shareholder Litigation
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 …
What Do Mutual Fund Investors Really Care About?
Do investors behave rationally? Many researchers examine actively managed mutual funds to answer this question. The advantage of doing so setting is that we can observe the past performance of fund managers as well as the capital allocation decisions of …
Skadden Discusses BlackRock Win in One of Largest Mutual Fund Cases Ever
Following an eight-day bench trial, Judge Freda L. Wolfson of the U.S. District Court for the District of New Jersey ruled in favor of certain subsidiaries of BlackRock, Inc. on $1.55 billion in claims brought under Section 36(b) of the …
Common Ownership Has Not Yet Ushered in an Era of Anticompetitive Behavior
As mutual funds have become popular with individual investors, the institutions that manage these funds have grown dramatically. Along with the benefit of offering individual investors inexpensive portfolio diversification and engagement in corporate governance, there is mounting concern that the …
The Role of Public Pension Funds in Governance
Public pension funds have great influence over corporate governance because of the size and nature of their portfolios: They manage more than $3 trillion in assets and often invest in a large number of companies. Besides largely unobservable private negotiations, …
The Subversion of Shareholder Democracy and the Rise of Hedge-Fund Activism
Hedge fund activists are technically just minority shareholders, yet they exert enormous influence, often forcing companies to undertake fundamental restructuring and substantially increase stock buybacks and dividends. For instance, Third Point Management and Trian Fund Management, holding only 2 percent …
Corporate Governance Consequences of Passive Investing
The popularity of index funds, which automatically track an index of stocks, is continuing to grow in the U.S, and, albeit less intensely, in the EU. Due to the high concentration of the index funds industry, the exponential rise of …
New Data Shed Light on Mutual Fund Time Horizons
Short-termism is a loaded phrase in debates over investment time horizons, often used to criticize investors and corporate managers deemed overly focused on near-term gains at the expense of long-term value. One argument is that U.S. mutual funds, as significant …
The Economic Impact of Mutual Fund Investor Behavior
While the behavior of mutual fund investors is an active field of study within finance, we do not know very much about how these behaviors have changed over time. The simple reason for this is that most studies in this …
Stock Market Indices: Inside the Black Box
The news that a whistleblower contacted U.S. regulators last month about alleged manipulation of the Chicago Board Options Exchange Volatility Index, or VIX, highlights near universal reliance on information that stock market indices provide. While the VIX is not itself …
Visionaries and Pragmatism in Financial Regulation
In a world of “alternative facts” and political rhetoric crafted to mislead, it is easy to forget that idealized visions can at times illuminate more than they obfuscate. In a book review recently published in Harvard Law Review and available …
The Case Against Passive Shareholder Voting
In the past few years, investors have begun to embrace the reality that academics have been championing for decades—that a broad-based passive indexing strategy is superior to picking individual stocks or actively managed mutual funds. As a result, millions of …
Mutual Fund Advisors’ “Empty Voting” Raises New Governance Issues
The creation of the mutual fund will go down as one of the greatest innovations in financial history. It has provided tens if not hundreds of millions of unsophisticated and uninformed stock market investors with easy access to low cost …
Mutual Funds and the Regulatory Capture of the SEC
Regulatory agencies are created to act in the public interest but often end up acting in the interests of those regulated. This is known as regulatory capture. The theory of regulatory capture may be given both a broad and narrow …
WilmerHale discusses how FINRA Allows Use of Related Performance Information in Communications Regarding Mutual Funds with Financial Intermediaries and Other Institutional Investors
On May 12, 2015, the staff of the Financial Industry Regulatory Authority (FINRA staff) issued an interpretive letter to Hartford Funds Distributors, LLC (Hartford Funds) that conditionally allows distributors of mutual funds to include certain types of related performance information …
Supreme Court Decides To Hear Applicability of Sarbanes-Oxley’s Whistleblower Protections
The Supreme Court recently granted certiorari to decide whether the whistleblower protections of the Sarbanes-Oxley Act (SOX), 18 U.S.C. § 1514A, extend to employees of privately held contractors or subcontractors of a public company. The case, Lawson v. FMR,…