Corporations operate in numerous markets -- product markets, labor markets, capital markets. This chapter focuses on the market that is the prerequisite for firms’ successful operation in all other markets, as it is the market that frames their organizational structure and governance: the market for corporate law. In the United States, two features of the legal landscape have informed such a conceptualization of corporate law as a product: (1) corporate law is the domain of the states rather than the national government; and (2) under the internal affairs doctrine, the state whose corporate law governs a firm is the state of its statutory domicile. This arrangement provides firms with a choice, they can select their governing law from among the states regardless of their physical location, hence the notion that states offer a product that corporations purchase, by means of incorporation fees (referred to as franchise taxes). For the past century, remarkably, one small state, Delaware, has been the market leader, serving as the domicile for the overwhelming majority of U.S. corporations. The debate over the market for corporate law has focused, in large part, on whether the phenomenon of Delaware’s dominance is for the better.The first part of the chapter analyzes the dynamics of the U.S. market for corporate law, which can best be characterized as states competing for corporate charters, along with data pertinent to the question of whom this market organization benefits -- managers or shareholders -- and explanations why Delaware has had a persistent and commanding position. The focus is on the market for public corporations, given their relative importance to the economy, the more extensive literature, and space limitations for this chapter. The second part of the chapter turns to explain Delaware’s persistence as the preeminent incorporation state. This is a distinctive feature of U.S. corporate law. There are other federal systems of corporate law, but a similar “Delaware” phenomenon does not exist. The chapter concludes with a summary and suggestions for future research.
{"title":"The Market for Corporate Law Redux","authors":"R. Romano","doi":"10.2139/ssrn.2514650","DOIUrl":"https://doi.org/10.2139/ssrn.2514650","url":null,"abstract":"Corporations operate in numerous markets -- product markets, labor markets, capital markets. This chapter focuses on the market that is the prerequisite for firms’ successful operation in all other markets, as it is the market that frames their organizational structure and governance: the market for corporate law. In the United States, two features of the legal landscape have informed such a conceptualization of corporate law as a product: (1) corporate law is the domain of the states rather than the national government; and (2) under the internal affairs doctrine, the state whose corporate law governs a firm is the state of its statutory domicile. This arrangement provides firms with a choice, they can select their governing law from among the states regardless of their physical location, hence the notion that states offer a product that corporations purchase, by means of incorporation fees (referred to as franchise taxes). For the past century, remarkably, one small state, Delaware, has been the market leader, serving as the domicile for the overwhelming majority of U.S. corporations. The debate over the market for corporate law has focused, in large part, on whether the phenomenon of Delaware’s dominance is for the better.The first part of the chapter analyzes the dynamics of the U.S. market for corporate law, which can best be characterized as states competing for corporate charters, along with data pertinent to the question of whom this market organization benefits -- managers or shareholders -- and explanations why Delaware has had a persistent and commanding position. The focus is on the market for public corporations, given their relative importance to the economy, the more extensive literature, and space limitations for this chapter. The second part of the chapter turns to explain Delaware’s persistence as the preeminent incorporation state. This is a distinctive feature of U.S. corporate law. There are other federal systems of corporate law, but a similar “Delaware” phenomenon does not exist. The chapter concludes with a summary and suggestions for future research.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134086691","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2014-08-08DOI: 10.1093/OXFORDHB/9780199687206.013.22
Andreas M. Fleckner
High-frequency trading, dark pools, front-running, phantom orders, short selling — the way securities are traded ranks high among today’s regulatory challenges. It has become commonplace, both in financial and in academic circles, to call for the government to intervene and impose order. From a historical and empirical perspective, however, many of the recent developments look less dramatic than some observers believe. This is the essence of the present chapter. It explains how today’s regulatory regime evolved, identifies the key rationale for governments to intervene, and analyzes the rules, regulators, and techniques of the world’s leading jurisdictions. The chapter’s central argument is that governments should focus on the price formation process and ensure that it is purely market-driven. Local regulators and self-regulatory organizations will take care of the rest.
{"title":"Regulating Trading Practices","authors":"Andreas M. Fleckner","doi":"10.1093/OXFORDHB/9780199687206.013.22","DOIUrl":"https://doi.org/10.1093/OXFORDHB/9780199687206.013.22","url":null,"abstract":"High-frequency trading, dark pools, front-running, phantom orders, short selling — the way securities are traded ranks high among today’s regulatory challenges. It has become commonplace, both in financial and in academic circles, to call for the government to intervene and impose order. From a historical and empirical perspective, however, many of the recent developments look less dramatic than some observers believe. This is the essence of the present chapter. It explains how today’s regulatory regime evolved, identifies the key rationale for governments to intervene, and analyzes the rules, regulators, and techniques of the world’s leading jurisdictions. The chapter’s central argument is that governments should focus on the price formation process and ensure that it is purely market-driven. Local regulators and self-regulatory organizations will take care of the rest.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117210613","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Regulatory authorities in countries around the world are attempting to improve financial regulation and supervision. In the aftermath of the global financial crisis (GFC), these attempts involve a three-step process: (1) diagnose what went wrong, (2) design regulatory and supervisory reforms that address these defects, and (3) implement the corrective reforms. We argue that US efforts to enhance financial regulation and supervision have faltered along each of these three dimensions. In particular, we provide numerous examples demonstrating that US authorities misdiagnosed, or perhaps in some cases even willfully disregarded, the causes of the crisis both by overemphasizing factors that did not play decisive roles in causing the onset or severity of the crisis and by underemphasizing factors that did. To increase regulatory accountability and help prevent another financial crisis, we propose the creation of an agency that would have access to all of the information available to regulators and whose sole function would be to publish regular reports on the key systemic risks in the financial system, and assessments of the adequacy of regulators' responses.
{"title":"Misdiagnosis: Incomplete Cures of Financial Regulatory Failures","authors":"James R. Barth, G. Caprio, Ross Levine","doi":"10.2139/ssrn.2472974","DOIUrl":"https://doi.org/10.2139/ssrn.2472974","url":null,"abstract":"Regulatory authorities in countries around the world are attempting to improve financial regulation and supervision. In the aftermath of the global financial crisis (GFC), these attempts involve a three-step process: (1) diagnose what went wrong, (2) design regulatory and supervisory reforms that address these defects, and (3) implement the corrective reforms. We argue that US efforts to enhance financial regulation and supervision have faltered along each of these three dimensions. In particular, we provide numerous examples demonstrating that US authorities misdiagnosed, or perhaps in some cases even willfully disregarded, the causes of the crisis both by overemphasizing factors that did not play decisive roles in causing the onset or severity of the crisis and by underemphasizing factors that did. To increase regulatory accountability and help prevent another financial crisis, we propose the creation of an agency that would have access to all of the information available to regulators and whose sole function would be to publish regular reports on the key systemic risks in the financial system, and assessments of the adequacy of regulators' responses.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127520135","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Foreign capital and institutional investors play a key role in the Brazilian capital and financial markets. Internationally promoted regulatory patterns, especially IOSCO principles, have been increasingly influencing administrative rule making by the Brazilian Securities and Exchange Commission (CVM) as well as the adoption of transnational rules in Brazil by means of self-regulatory activity. Even though there is a certain level of convergence of market regulatory standards at the transnational level, implementation and enforcement of rules remains essentially domestic. We analyze two case studies regarding the transposition of international standards into the Brazilian legal system, which illustrate this tension between the transnational and domestic dimensions of financial markets regulation. The first case concerns a CVM rule on disclosure of executive compensation and the its interpretation by local courts. The second case refers to the adoption of suitability rules.
{"title":"Enforcing international financial standards in Brazil: limits and possibilities for adoption of IOSCO principles","authors":"V. Prado, Luiza Saito Sampaio","doi":"10.2139/SSRN.2456343","DOIUrl":"https://doi.org/10.2139/SSRN.2456343","url":null,"abstract":"Foreign capital and institutional investors play a key role in the Brazilian capital and financial markets. Internationally promoted regulatory patterns, especially IOSCO principles, have been increasingly influencing administrative rule making by the Brazilian Securities and Exchange Commission (CVM) as well as the adoption of transnational rules in Brazil by means of self-regulatory activity. Even though there is a certain level of convergence of market regulatory standards at the transnational level, implementation and enforcement of rules remains essentially domestic. We analyze two case studies regarding the transposition of international standards into the Brazilian legal system, which illustrate this tension between the transnational and domestic dimensions of financial markets regulation. The first case concerns a CVM rule on disclosure of executive compensation and the its interpretation by local courts. The second case refers to the adoption of suitability rules.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"73 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121712879","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article explains the concept of the “company’s interests” for Italian companies whose shares are listed on the stock exchange or publicly traded. On this topic, “contractual views” and “institutional views” offer very different interpretations. The Italian reform of corporate law or “Vietti Reform” (2003–2006) has introduced several changes to the old civil code and the consolidated law on financial intermediation and listed companies (testo unico sulla finanza-t.u.f.). The latter has been in force since 1998, undergoing several alterations before 2011. The new corporate regulations provide renewed ways of examining these issues and testing the current understanding of the “company’s interests”. We do not consider stateowned companies and groups of companies, since these would require a different discussion.
本文解释了股票在证券交易所上市或公开交易的意大利公司的“公司利益”的概念。在这个问题上，“契约观”和“制度观”提供了截然不同的解释。意大利公司法改革或“Vietti改革”(2003-2006年)对旧民法典和金融中介和上市公司合并法(testo unico sulla finanza-t.u.f)进行了几项修改。后者自1998年起生效，在2011年之前经历了几次修改。新的公司条例提供了审视这些问题的新方法，并检验了目前对“公司利益”的理解。我们不考虑国有企业和企业集团，因为这需要进行不同的讨论。
{"title":"The 'Company's Interests' of the 'Società Aperte' Under Italian Corporate Laws","authors":"Monica Cossu","doi":"10.1515/ecfr-2013-0045","DOIUrl":"https://doi.org/10.1515/ecfr-2013-0045","url":null,"abstract":"This article explains the concept of the “company’s interests” for Italian companies whose shares are listed on the stock exchange or publicly traded. On this topic, “contractual views” and “institutional views” offer very different interpretations. The Italian reform of corporate law or “Vietti Reform” (2003–2006) has introduced several changes to the old civil code and the consolidated law on financial intermediation and listed companies (testo unico sulla finanza-t.u.f.). The latter has been in force since 1998, undergoing several alterations before 2011. The new corporate regulations provide renewed ways of examining these issues and testing the current understanding of the “company’s interests”. We do not consider stateowned companies and groups of companies, since these would require a different discussion.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125124852","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Jobs Act was enacted to promote efficient access to external capital by small businesses. Title III of the Jobs Act offers small businesses the chance of efficient financial intermediation through crowdfunding. The crowdfunding exemption is not self-executing but, instead, requires regulatory implementation by the SEC.The Commission’s first iteration of its crowdfunding rules fails to offer small businesses efficient access to external capital. Principally, this is because the proposed crowdfunding rules: (1) require excessive disclosures, especially regarding smaller crowdfunding offerings; (2) fail to offer small businesses relying on the crowdfunding exemption two-way safe harbor integration protection; and (3) fail to protect small businesses from the loss of the crowdfunding exemption as the result of the financial intermediary’s failure to meet its statutory and regulatory obligations.The problems can be fixed by the Commission by revising its proposed crowdfunding regulations, thereby fulfilling its broad and ubiquitous obligation to balance capital formation and investor protection.
{"title":"Proposed Crowdfunding Regulations Under the Jobs Act: Please, SEC, Revise Your Proposed Regulations in Order to Promote Small Business Capital Formation","authors":"Rutheford B. Campbell","doi":"10.2139/SSRN.2406214","DOIUrl":"https://doi.org/10.2139/SSRN.2406214","url":null,"abstract":"The Jobs Act was enacted to promote efficient access to external capital by small businesses. Title III of the Jobs Act offers small businesses the chance of efficient financial intermediation through crowdfunding. The crowdfunding exemption is not self-executing but, instead, requires regulatory implementation by the SEC.The Commission’s first iteration of its crowdfunding rules fails to offer small businesses efficient access to external capital. Principally, this is because the proposed crowdfunding rules: (1) require excessive disclosures, especially regarding smaller crowdfunding offerings; (2) fail to offer small businesses relying on the crowdfunding exemption two-way safe harbor integration protection; and (3) fail to protect small businesses from the loss of the crowdfunding exemption as the result of the financial intermediary’s failure to meet its statutory and regulatory obligations.The problems can be fixed by the Commission by revising its proposed crowdfunding regulations, thereby fulfilling its broad and ubiquitous obligation to balance capital formation and investor protection.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"60 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-02-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126581442","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Securities and Exchange Commission has proposed rules that will implement the crowfunding exemption set forth in the JOBS Act. See SEC File No. S7-09-13. Once implemented, the exemption will allow non-reporting companies to use crowdfunding to raise equity. The SEC’s proposal, however, raises a number of issues, including: (A) concerns over reliance on the “collective wisdom of the crowd” as a substitute for traditional investor protections; (B) concerns over reliance on investor self-certification as a means of enforcing the investment limits for individual investors; (C) the inconsistency of the proposed method of calculating the offering limits applicable to issuers with the requirements of the JOBS Act; (D) concerns over the elimination of the integration doctrine; (E) the need to address and include persons in civil unions/civil partnerships within the definition of family member; and (F) the need to require the filing of Form Funding Portal in an interactive format. The attached paper analyzes all of these issues.
美国证券交易委员会(Securities and Exchange Commission)提出了实施《就业法案》(JOBS Act)中规定的众筹豁免的规则。见SEC文件编号。S7-09-13。一旦实施，这项豁免将允许未申报的公司利用众筹筹集股权。然而，SEC的提议提出了一系列问题，包括:(a)对依赖“群体智慧”来替代传统投资者保护的担忧;(B)对依赖投资者自我认证作为执行个人投资者投资限制的手段的担忧;(C)适用于发行人的发行限额的拟议计算方法与《就业法案》的要求不一致;(D)对取消一体化原则的担忧;(E)需要将民事结合/民事伴侣关系中的人纳入家庭成员的定义;以及(F)要求以交互式格式提交“表格资助门户”的必要性。本文对这些问题进行了分析。
{"title":"Selling Equity Through Crowdfunding: A Comment","authors":"J. Brown","doi":"10.2139/SSRN.2386278","DOIUrl":"https://doi.org/10.2139/SSRN.2386278","url":null,"abstract":"The Securities and Exchange Commission has proposed rules that will implement the crowfunding exemption set forth in the JOBS Act. See SEC File No. S7-09-13. Once implemented, the exemption will allow non-reporting companies to use crowdfunding to raise equity. The SEC’s proposal, however, raises a number of issues, including: (A) concerns over reliance on the “collective wisdom of the crowd” as a substitute for traditional investor protections; (B) concerns over reliance on investor self-certification as a means of enforcing the investment limits for individual investors; (C) the inconsistency of the proposed method of calculating the offering limits applicable to issuers with the requirements of the JOBS Act; (D) concerns over the elimination of the integration doctrine; (E) the need to address and include persons in civil unions/civil partnerships within the definition of family member; and (F) the need to require the filing of Form Funding Portal in an interactive format. The attached paper analyzes all of these issues.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123922444","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The primary mission of the U.S. Securities and Exchange Commission is to protect investors. However, current securities regulation clearly separates between public markets and private markets with respect to investor protection. While the federal securities laws impose strict and costly disclosure and anti-fraud requirements on issuers that offer their securities to the public, they exempt private offerings from such rigid regime. The liberal approach toward private offerings is based on the assumption that investors in private markets are sophisticated and thus can "fend for themselves". This Article explores the validity of such traditional dichotomy between the public market and the private market in a relatively new, organized secondary market for ownership interests in private companies with retail investor access (the "Secondary Market"). The Secondary Market provides investors and employees with an opportunity to sell their holdings even before the first exit event. It also allows greater flexibility in capital formation, which may enhance productivity and job growth. However, the Secondary Market raises serious problems with regard to investor protection. As this Article shows, the rise of the Secondary Market has revealed conspicuous cracks in the wall traditionally separating the public and the private markets and the two markets’ participants – the sophisticated investors versus the unsophisticated investors. This separation was undermined by the penetration of unsophisticated investors to the private market sphere and by the erosion of the assumptions regarding the ability of Secondary Market’s participants to fend for themselves. The Article suggests that the erosion of the sophistication presumption deems the classic dichotomy between the heavily regulated public market and the lightly regulated private market artificial. It calls for a reexamination of the current regulatory regime with respect to investor protection. Such reexamination is of particular importance in light of the new Jumpstart Our Business Startups (JOBS) Act that would enable private companies to stay private longer, and the Secondary Market to thrive.
美国证券交易委员会的主要任务是保护投资者。然而，目前的证券监管在保护投资者方面明确区分了公开市场和私人市场。虽然联邦证券法对向公众发行证券的发行人施加了严格且代价高昂的披露和反欺诈要求，但它们却使私募不受这种严格制度的约束。对私募发行的开明做法是基于这样一种假设，即私募市场的投资者是老练的，因此能够“自谋生路”。本文探讨了在一个相对较新的、有组织的二级市场(二级市场)中，公开市场和私人市场之间的这种传统二分法的有效性，二级市场是为零售投资者进入私营公司的所有权利益而设立的。二级市场为投资者和员工提供了一个机会，甚至在第一次退出事件发生之前出售他们的持股。它还允许资本形成更大的灵活性，这可能会提高生产率和就业增长。然而，二级市场在保护投资者方面提出了严重的问题。正如本文所显示的，二级市场的兴起已经揭示了传统上区分公开市场和私人市场以及两个市场参与者(成熟投资者和不成熟投资者)的明显裂缝。由于缺乏经验的投资者渗透到私人市场领域，以及二级市场参与者自我保护能力的假设受到侵蚀，这种分离被破坏了。本文认为，对复杂假设的侵蚀认为，监管严格的公共市场和监管宽松的私人市场之间的经典二分法是人为的。它呼吁重新审查有关投资者保护的现行监管制度。鉴于新的《启动创业公司法案》(Jumpstart Our Business Startups，简称JOBS)，这种重新审查尤其重要，该法案将使私营公司能够保持更长时间的私有状态，并使二级市场蓬勃发展。
{"title":"The Curious Case of the Secondary Market with Respect to Investor Protection","authors":"A. Osovsky","doi":"10.2139/SSRN.2364542","DOIUrl":"https://doi.org/10.2139/SSRN.2364542","url":null,"abstract":"The primary mission of the U.S. Securities and Exchange Commission is to protect investors. However, current securities regulation clearly separates between public markets and private markets with respect to investor protection. While the federal securities laws impose strict and costly disclosure and anti-fraud requirements on issuers that offer their securities to the public, they exempt private offerings from such rigid regime. The liberal approach toward private offerings is based on the assumption that investors in private markets are sophisticated and thus can \"fend for themselves\". This Article explores the validity of such traditional dichotomy between the public market and the private market in a relatively new, organized secondary market for ownership interests in private companies with retail investor access (the \"Secondary Market\"). The Secondary Market provides investors and employees with an opportunity to sell their holdings even before the first exit event. It also allows greater flexibility in capital formation, which may enhance productivity and job growth. However, the Secondary Market raises serious problems with regard to investor protection. As this Article shows, the rise of the Secondary Market has revealed conspicuous cracks in the wall traditionally separating the public and the private markets and the two markets’ participants – the sophisticated investors versus the unsophisticated investors. This separation was undermined by the penetration of unsophisticated investors to the private market sphere and by the erosion of the assumptions regarding the ability of Secondary Market’s participants to fend for themselves. The Article suggests that the erosion of the sophistication presumption deems the classic dichotomy between the heavily regulated public market and the lightly regulated private market artificial. It calls for a reexamination of the current regulatory regime with respect to investor protection. Such reexamination is of particular importance in light of the new Jumpstart Our Business Startups (JOBS) Act that would enable private companies to stay private longer, and the Secondary Market to thrive.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124662003","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Article offers a broad theory of what distinguishes investment funds from ordinary companies, with ramifications for how these funds are understood and regulated. The central claim is that investment funds (i.e., mutual funds, hedge funds, private equity funds and their cousins) are distinguished not by the assets they hold, but by their unique organizational structures. These structures separate investment assets and management assets into different entities with different owners. The investments belong to “funds,” while the management assets belong to “management companies.” This structure benefits investors in the funds in a rather paradoxical way: it limits their rights to control their managers and share in their managers’ profits and liabilities. Fund investors accept these limits because certain features common to most investment funds make them efficient. Those features include powerful investor exit rights and economies of scope and scale that encourage managers to operate multiple funds at the same time. These features diminish the importance of control and increase the importance of asset partitioning. This way of understanding investment funds sheds light on a number of key areas of contracting and regulation and refutes the claims of skeptics who say that fund investors would be better off if they employed their managers directly.
{"title":"The Separation of Funds and Managers: A Theory of Investment Fund Structure and Regulation","authors":"J. Morley","doi":"10.2139/ssrn.2240468","DOIUrl":"https://doi.org/10.2139/ssrn.2240468","url":null,"abstract":"This Article offers a broad theory of what distinguishes investment funds from ordinary companies, with ramifications for how these funds are understood and regulated. The central claim is that investment funds (i.e., mutual funds, hedge funds, private equity funds and their cousins) are distinguished not by the assets they hold, but by their unique organizational structures. These structures separate investment assets and management assets into different entities with different owners. The investments belong to “funds,” while the management assets belong to “management companies.” This structure benefits investors in the funds in a rather paradoxical way: it limits their rights to control their managers and share in their managers’ profits and liabilities. Fund investors accept these limits because certain features common to most investment funds make them efficient. Those features include powerful investor exit rights and economies of scope and scale that encourage managers to operate multiple funds at the same time. These features diminish the importance of control and increase the importance of asset partitioning. This way of understanding investment funds sheds light on a number of key areas of contracting and regulation and refutes the claims of skeptics who say that fund investors would be better off if they employed their managers directly.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"105 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-12-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122330755","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This "white paper," written for the Roosevelt Institute, looks at the Dodd-Frank Orderly Liquidation Authority, as currently conceived of by regulators. The existence of OLA is crucial to the idea that the Dodd-Frank Act has actually ended "too big to fail." Since financial institutions remain very big, it is up to OLA to provide a means for them to fail. The real question is whether OLA will work and, as OLA was originally presented, there were good reasons for doubt.The FDIC has figured out a clever way to avoid the problems with OLA. Under the new "single point of entry" approach, only the holding company would be placed in OLA, and the FDIC would then continue to prop up the operating subsidiaries, wherever located. The new question is: Will single point of entry work?This short essay explores this question and what remains to be done to create a workable bankruptcy system for global banks. In short, I argue that while single point of entry is a great improvement, it still has its potential faults, and the excitement over it obscures many lingering questions. And nothing has been done to improve the ability of chapter 11 to handle a large financial institution, despite the fact that OLA is only supposed to "backstop" the normal bankruptcy process.
{"title":"OLA after Single Point of Entry: Has Anything Changed?","authors":"S. Lubben","doi":"10.2139/SSRN.2353035","DOIUrl":"https://doi.org/10.2139/SSRN.2353035","url":null,"abstract":"This \"white paper,\" written for the Roosevelt Institute, looks at the Dodd-Frank Orderly Liquidation Authority, as currently conceived of by regulators. The existence of OLA is crucial to the idea that the Dodd-Frank Act has actually ended \"too big to fail.\" Since financial institutions remain very big, it is up to OLA to provide a means for them to fail. The real question is whether OLA will work and, as OLA was originally presented, there were good reasons for doubt.The FDIC has figured out a clever way to avoid the problems with OLA. Under the new \"single point of entry\" approach, only the holding company would be placed in OLA, and the FDIC would then continue to prop up the operating subsidiaries, wherever located. The new question is: Will single point of entry work?This short essay explores this question and what remains to be done to create a workable bankruptcy system for global banks. In short, I argue that while single point of entry is a great improvement, it still has its potential faults, and the excitement over it obscures many lingering questions. And nothing has been done to improve the ability of chapter 11 to handle a large financial institution, despite the fact that OLA is only supposed to \"backstop\" the normal bankruptcy process.","PeriodicalId":309706,"journal":{"name":"CGN: Governance Law & Arrangements by Subject Matter (Topic)","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114523519","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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