The study reviews important interactions between mutual funds and individual investors in choosing equity mutual funds. An important question is why both sophisticated and unsophisticated investors continue to invest in actively managed funds that generally underperform. Actively managed funds have histories of high levels of spending on advertising because they know it works in increasing assets under management. Fund managers have learned that investors chase past performance in the mistaken belief that the past predicts future performance. Funds further take advantage of investors by increasing advertising when current past performance is high. Advertising encourages individual investors to make fund choices in specific funds because they are generally unsophisticated, uninformed, and have low financial literacy, including a lack of knowledge of both transparent and opaque fund expenses and fees. Any persistence in high fund performance is also much more likely due to luck than portfolio manager skill. The Securities and Exchange Commission has also failed to prohibit performance advertising or to require it to be unambiguous.
本研究回顾了共同基金与个人投资者在选择股票型共同基金时的重要互动关系。一个重要的问题是，为什么成熟和不成熟的投资者都继续投资于通常表现不佳的积极管理型基金。积极管理型基金在广告上的支出历来很高，因为它们知道，这有助于增加管理下的资产。基金经理已经认识到，投资者追逐过去的表现，错误地认为过去可以预测未来的表现。当当前过往业绩高时，基金通过增加广告来进一步利用投资者。广告鼓励个人投资者在特定的基金中进行基金选择，因为他们通常不成熟，不知情，金融素养低，包括对透明和不透明的基金费用和费用缺乏了解。基金持续保持高业绩也更可能是运气，而不是投资组合经理的技能。美国证券交易委员会(Securities and Exchange Commission)也未能禁止业绩广告，或要求其明确无误。
{"title":"Chapter 29: Mutual Funds and Individual Investors: Advertising and Behavioral Issues","authors":"John A. Haslem","doi":"10.2139/ssrn.2146632","DOIUrl":"https://doi.org/10.2139/ssrn.2146632","url":null,"abstract":"The study reviews important interactions between mutual funds and individual investors in choosing equity mutual funds. An important question is why both sophisticated and unsophisticated investors continue to invest in actively managed funds that generally underperform. Actively managed funds have histories of high levels of spending on advertising because they know it works in increasing assets under management. Fund managers have learned that investors chase past performance in the mistaken belief that the past predicts future performance. Funds further take advantage of investors by increasing advertising when current past performance is high. Advertising encourages individual investors to make fund choices in specific funds because they are generally unsophisticated, uninformed, and have low financial literacy, including a lack of knowledge of both transparent and opaque fund expenses and fees. Any persistence in high fund performance is also much more likely due to luck than portfolio manager skill. The Securities and Exchange Commission has also failed to prohibit performance advertising or to require it to be unambiguous.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"306 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116226886","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 the first general examination of mutual fund capital structure regulation under the Investment Company Act of 1940. Such an examination is long overdue, because American mutual funds collectively hold $12 trillion in assets—about as much as the commercial banking industry—and regulation constrains their use of debt capital very tightly. The Article reaches two conclusions: First, the regulation of mutual funds’ capital structure is incoherent. Although we might imagine several purposes for this regulation, such as limiting risks to investors and the financial system and preventing investor confusion, the regulation is not actually consistent with these purposes. It does both too much and too little to achieve them. Second, although at present the only type of security mutual funds can issue is common stock, there is no compelling reason why they should not also be allowed to issue debt securities. Debt securities might benefit investors by offering a safer and more stable alternative to the common stock of money market funds. Unlike shares in money market funds, debt securities could offer fixed interest rates and the safety of senior priorities. Such a proposal is clearly feasible, because mutual funds already borrow from banks and derivative counterparties and they issued debt securities without problems in the era before regulation.
{"title":"The Regulation of Mutual Fund Debt","authors":"J. Morley","doi":"10.2139/SSRN.2070884","DOIUrl":"https://doi.org/10.2139/SSRN.2070884","url":null,"abstract":"This Article offers the first general examination of mutual fund capital structure regulation under the Investment Company Act of 1940. Such an examination is long overdue, because American mutual funds collectively hold $12 trillion in assets—about as much as the commercial banking industry—and regulation constrains their use of debt capital very tightly. The Article reaches two conclusions: First, the regulation of mutual funds’ capital structure is incoherent. Although we might imagine several purposes for this regulation, such as limiting risks to investors and the financial system and preventing investor confusion, the regulation is not actually consistent with these purposes. It does both too much and too little to achieve them. Second, although at present the only type of security mutual funds can issue is common stock, there is no compelling reason why they should not also be allowed to issue debt securities. Debt securities might benefit investors by offering a safer and more stable alternative to the common stock of money market funds. Unlike shares in money market funds, debt securities could offer fixed interest rates and the safety of senior priorities. Such a proposal is clearly feasible, because mutual funds already borrow from banks and derivative counterparties and they issued debt securities without problems in the era before regulation.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121355874","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}
Foundational financial legislation is typically adopted in the midst or aftermath of financial crises, when an informed understanding of the causes of the crisis is not yet available. Moreover, financial institutions operate in a dynamic environment of considerable uncertainty, such that legislation enacted even under the best of circumstances can have perverse unintended consequences, and regulatory requirements correct for an initial set of conditions can become inappropriate as economic and technological circumstances change. Furthermore, the stickiness of the status quo in the U.S. political system renders it difficult to revise legislation, even though there may be a consensus to do so. This essay contends that the best means of responding to this dismal state of affairs is to include, as a matter of course, in crisis-driven financial legislation and its implementing regulation, two key procedural mechanisms: (1) a requirement of automatic subsequent review and reconsideration of the legislative and regulatory decisions at some future point in time; and (2) regulatory exemptive or waiver powers that encourage, where feasible, small scale experimentation, as well as flexibility in implementation. Both procedural devices will better inform and calibrate the regulatory apparatus, and could thereby mitigate, at least on the margin, the unintended errors which will invariably accompany financial legislation and rulemaking originating in a crisis. Given the centrality of financial institutions and markets to economic growth and societal well-being, it is exceedingly important for legislators acting in a financial crisis with the best of intentions, to not make matters worse.
{"title":"Regulating in the Dark","authors":"R. Romano","doi":"10.2139/ssrn.1974148","DOIUrl":"https://doi.org/10.2139/ssrn.1974148","url":null,"abstract":"Foundational financial legislation is typically adopted in the midst or aftermath of financial crises, when an informed understanding of the causes of the crisis is not yet available. Moreover, financial institutions operate in a dynamic environment of considerable uncertainty, such that legislation enacted even under the best of circumstances can have perverse unintended consequences, and regulatory requirements correct for an initial set of conditions can become inappropriate as economic and technological circumstances change. Furthermore, the stickiness of the status quo in the U.S. political system renders it difficult to revise legislation, even though there may be a consensus to do so. This essay contends that the best means of responding to this dismal state of affairs is to include, as a matter of course, in crisis-driven financial legislation and its implementing regulation, two key procedural mechanisms: (1) a requirement of automatic subsequent review and reconsideration of the legislative and regulatory decisions at some future point in time; and (2) regulatory exemptive or waiver powers that encourage, where feasible, small scale experimentation, as well as flexibility in implementation. Both procedural devices will better inform and calibrate the regulatory apparatus, and could thereby mitigate, at least on the margin, the unintended errors which will invariably accompany financial legislation and rulemaking originating in a crisis. Given the centrality of financial institutions and markets to economic growth and societal well-being, it is exceedingly important for legislators acting in a financial crisis with the best of intentions, to not make matters worse.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132782910","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 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) has broad and deep implications that will touch every corner of the financial services industry, as well as multiple other industries. This article is the first to fully examine shareholder derivative lawsuits filed after a negative “say on pay” vote on executive compensation under the Dodd-Frank Act. The article begins by providing a history of “say on pay” votes and examining the “say on pay” provisions of the Dodd-Frank Act. The article transitions into a discussion of how the Dodd-Frank “say on pay” provisions are currently being utilized by shareholders in derivative lawsuits. Specifically, the article will analyze in detail the legal theories raised and remedies sought by the litigants in the only two post-Dodd-Frank decisions that have been handed down by courts to date. Based on this analysis, the article provides recommendations for companies on how to re-write their “pay for performance” executive compensation policies and how to respond positively and actively to a negative “say on pay” vote on executive compensation. The article concludes by proposing an amendment to the Dodd-Frank Act which, if promulgated, would provide that a second successive negative “say on pay” vote (50% or more of shareholder votes cast against the proposed executive compensation package) on executive compensation would prompt a vote on a “spill” resolution and, if that resolution passes, all directors, except for the managing director, must stand for re-election at a special “spill” meeting within 90 days of the annual shareholder meeting where the “spill” resolution passed.
《多德-弗兰克华尔街改革和消费者保护法案》(“多德-弗兰克法案”)具有广泛而深刻的影响，将触及金融服务业的各个角落，以及其他多个行业。本文首次全面研究了在多德-弗兰克法案(Dodd-Frank Act)对高管薪酬“话语权”(say on pay)投票否决后，股东提起的衍生诉讼。本文首先介绍了“薪酬话语权”投票的历史，并考察了《多德-弗兰克法案》(Dodd-Frank Act)的“薪酬话语权”条款。文章过渡到多德-弗兰克“薪酬话语权”条款目前如何被股东在衍生诉讼中利用的讨论。具体而言，本文将详细分析在多德-弗兰克法案颁布后的两项法院判决中，诉讼当事人提出的法律理论和寻求的补救措施。在此分析的基础上，本文为企业如何重新制定“绩效薪酬”高管薪酬政策，以及如何积极主动地应对高管薪酬“薪酬话语权”的负面投票提出了建议。文章最后提出了对《多德-弗兰克法案》(Dodd-Frank Act)的一项修正案，该修正案如果颁布，将规定对高管薪酬进行连续第二次否决的“薪酬话语权”投票(50%或以上的股东投票反对拟议的高管薪酬方案)，将促使对“溢薪”决议进行投票，如果该决议通过，除常务董事外的所有董事，必须在通过“泄漏”决议的年度股东大会90天内举行的特别“泄漏”会议上竞选连任。
{"title":"Ending the Silence: Shareholder Derivative Suits and Amending the Dodd-Frank Act so 'Say on Pay' Votes May Be Heard in the Boardroom","authors":"W. Nelson","doi":"10.2139/SSRN.1988544","DOIUrl":"https://doi.org/10.2139/SSRN.1988544","url":null,"abstract":"The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) has broad and deep implications that will touch every corner of the financial services industry, as well as multiple other industries. This article is the first to fully examine shareholder derivative lawsuits filed after a negative “say on pay” vote on executive compensation under the Dodd-Frank Act. The article begins by providing a history of “say on pay” votes and examining the “say on pay” provisions of the Dodd-Frank Act. The article transitions into a discussion of how the Dodd-Frank “say on pay” provisions are currently being utilized by shareholders in derivative lawsuits. Specifically, the article will analyze in detail the legal theories raised and remedies sought by the litigants in the only two post-Dodd-Frank decisions that have been handed down by courts to date. Based on this analysis, the article provides recommendations for companies on how to re-write their “pay for performance” executive compensation policies and how to respond positively and actively to a negative “say on pay” vote on executive compensation. The article concludes by proposing an amendment to the Dodd-Frank Act which, if promulgated, would provide that a second successive negative “say on pay” vote (50% or more of shareholder votes cast against the proposed executive compensation package) on executive compensation would prompt a vote on a “spill” resolution and, if that resolution passes, all directors, except for the managing director, must stand for re-election at a special “spill” meeting within 90 days of the annual shareholder meeting where the “spill” resolution passed.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"202 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-01-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132239747","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}
In 2007, the Securities and Exchange Commission (SEC) removed rule 10a-1 of the Securities Exchange Act of 1934 from stock trading. Rule 10a-1, commonly referred to as the “uptick rule,” is a stock trading rule that had been in place since 1938. The uptick rule put price restrictions on short selling in order to protect investors from heavy losses in the stock market. The SEC had conducted an experiment in 2005 to determine the effects of removing the uptick rule, and the results of the SEC experiment had suggested that the stock market would be three times more profitable with the uptick rule than without it. The problem was that this finding had no theory to explain it. In this analysis, another test is made of the expected increase in profitability with the addition of price restrictions on short selling, and it was found that the market could be expected to be 2.5 to 2.66 times more profitable with the uptick rule than without it. The increase in profitability would amount to a gain of over one half of one Trillion dollars per year if the uptick rule were reinstated. The problem with a lack of theory to explain this difference still remains.
{"title":"Is the Stock Market More Profitable with the Uptick Rule than Without It? Testing the Steady Gain Hypothesis","authors":"T. K. Arnold","doi":"10.2139/ssrn.1936896","DOIUrl":"https://doi.org/10.2139/ssrn.1936896","url":null,"abstract":"In 2007, the Securities and Exchange Commission (SEC) removed rule 10a-1 of the Securities Exchange Act of 1934 from stock trading. Rule 10a-1, commonly referred to as the “uptick rule,” is a stock trading rule that had been in place since 1938. The uptick rule put price restrictions on short selling in order to protect investors from heavy losses in the stock market. The SEC had conducted an experiment in 2005 to determine the effects of removing the uptick rule, and the results of the SEC experiment had suggested that the stock market would be three times more profitable with the uptick rule than without it. The problem was that this finding had no theory to explain it. In this analysis, another test is made of the expected increase in profitability with the addition of price restrictions on short selling, and it was found that the market could be expected to be 2.5 to 2.66 times more profitable with the uptick rule than without it. The increase in profitability would amount to a gain of over one half of one Trillion dollars per year if the uptick rule were reinstated. The problem with a lack of theory to explain this difference still remains.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134159810","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}
States do not exercise extraterritorial power when a civil remedy for purchasers of securities victimized by unlawful conduct in the offer and sale of those securities is invoked by out of state purchasers under the Blue Sky Law of the state in and from which the distribution of securities was undertaken. The Extraterritoriality Principle under the Dormant Commerce Clause of the U.S. Constitution does not bar the invocation of a post-transaction by out of state purchasers. A United States District Court misapplied the Extraterritoriality Principle by constructing a bright-line "transaction" test to cabin the territorial limit of a purchaser remedy. The court ignored the object of regulation and protection under Blue Sky Laws as applied to the entire process of a distribution of securities, and mistakenly equated the application of a post-transaction civil remedy with the projection of state regulation outside the state.
{"title":"Misapplication of the Federal Extraterritoriality Principle in Limiting the Scope of Civil Remedies for Fraud Under State Blue Sky Laws","authors":"R. Rapp","doi":"10.2139/SSRN.1924973","DOIUrl":"https://doi.org/10.2139/SSRN.1924973","url":null,"abstract":"States do not exercise extraterritorial power when a civil remedy for purchasers of securities victimized by unlawful conduct in the offer and sale of those securities is invoked by out of state purchasers under the Blue Sky Law of the state in and from which the distribution of securities was undertaken. The Extraterritoriality Principle under the Dormant Commerce Clause of the U.S. Constitution does not bar the invocation of a post-transaction by out of state purchasers. A United States District Court misapplied the Extraterritoriality Principle by constructing a bright-line \"transaction\" test to cabin the territorial limit of a purchaser remedy. The court ignored the object of regulation and protection under Blue Sky Laws as applied to the entire process of a distribution of securities, and mistakenly equated the application of a post-transaction civil remedy with the projection of state regulation outside the state.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"166 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-09-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114371705","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}
Arizona’s modern securities laws were enacted in 1951. The 1951 Securities Act replaced statutes enacted between 1912 and 1921. Stock swindles in the late 1940s exposed the weakness of these early securities laws. At the time, Arizona’s post-war economy was booming. New business leaders and statesmen emerged who were committed to economic expansion and improved government. Committees were formed to plan for post-war growth and study improvements in Arizona’s laws. One of these was a special committee formed to draft new securities legislation. Through the committee’s work, legislation creating the Arizona Securities Division passed in 1949. That same year, Edward Hastings, who later became an SEC commissioner, was appointed as the state’s first Securities Director. The article describes the background to Hastings’ appointment and introduces the attorneys – Bud Jacobson, Joe Ralston, and Lorna Lockwood – who participated in drafting the 1949 legislation. After Hastings’ appointment, he and Jacobson led the previously formed securities committee in drafting what became the 1951 Securities Act. A 1948 model act prepared by the Investment Bankers Association was used as a starting point. From that, Hastings, Jacobson, and the securities committee used their own insights, SEC comments, and suggestions from the state’s business and legal community, to produce a nonuniform securities act that is unique to Arizona. The article briefly summarizes some of the 1951 Act’s highlights and provides a short overview of the Act’s early effects on Arizona’s securities markets.
{"title":"Turning 60: Bud Jacobson, Earl Hastings, and Arizona’s 1951 Securities Act","authors":"Richard G. Himelrick","doi":"10.2139/SSRN.1915681","DOIUrl":"https://doi.org/10.2139/SSRN.1915681","url":null,"abstract":"Arizona’s modern securities laws were enacted in 1951. The 1951 Securities Act replaced statutes enacted between 1912 and 1921. Stock swindles in the late 1940s exposed the weakness of these early securities laws. At the time, Arizona’s post-war economy was booming. New business leaders and statesmen emerged who were committed to economic expansion and improved government. Committees were formed to plan for post-war growth and study improvements in Arizona’s laws. One of these was a special committee formed to draft new securities legislation. Through the committee’s work, legislation creating the Arizona Securities Division passed in 1949. That same year, Edward Hastings, who later became an SEC commissioner, was appointed as the state’s first Securities Director. The article describes the background to Hastings’ appointment and introduces the attorneys – Bud Jacobson, Joe Ralston, and Lorna Lockwood – who participated in drafting the 1949 legislation. After Hastings’ appointment, he and Jacobson led the previously formed securities committee in drafting what became the 1951 Securities Act. A 1948 model act prepared by the Investment Bankers Association was used as a starting point. From that, Hastings, Jacobson, and the securities committee used their own insights, SEC comments, and suggestions from the state’s business and legal community, to produce a nonuniform securities act that is unique to Arizona. The article briefly summarizes some of the 1951 Act’s highlights and provides a short overview of the Act’s early effects on Arizona’s securities markets.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132521877","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}
During the late nineteenth and early twentieth centuries fundamental changes in economic thought revolutionized the theory of corporate finance, leading to changes in its legal regulation. The changes were massive, and this branch of financial analysis and law became virtually unrecognizable to those who had practiced it earlier. The source of this revision was the marginalist, or neoclassical, revolution in economic thought. The classical theory had seen corporate finance as an historical, relatively self-executing inquiry based on the classical theory of value and administered by common law courts. By contrast, neoclassical value theory was forward looking and as a result a much more realistic way of assessing a corporation's value; but it was also subject to a great deal more prediction and interpretation, and thus to more abuse. That possibility led the states first and later the federal government to respond with regulatory legislation.While marginalism effected a sweeping change in regulatory attitudes toward the corporation, the changes in the basic theory of corporate behavior, including finance, were at least as striking. The marginalist revolution turned the corporation into a rational actor intent on maximizing value. Neoclassical corporate finance theory unambiguously choose marginalist price theory rather than welfare economics as the source of its working assumptions, thus guaranteeing the irrelevance of not only the individual shareholder but also of managers. Or to say it differently, the neoclassical concept of the corporation did not merely separate ownership from control; it separated corporate decision making from all human preference whatsoever, unless those preferences were simply asserted to be maximization of value. Within the neoclassical model the separate human identities of shareholders or even managers came to matter only under the rubric of agency costs, which were regarded as nothing more than an imperfection in the neoclassical corporate ideal.
{"title":"The Marginalist Revolution in Corporate Finance: 1880-1965","authors":"Herbert Hovenkamp","doi":"10.2139/SSRN.1141291","DOIUrl":"https://doi.org/10.2139/SSRN.1141291","url":null,"abstract":"During the late nineteenth and early twentieth centuries fundamental changes in economic thought revolutionized the theory of corporate finance, leading to changes in its legal regulation. The changes were massive, and this branch of financial analysis and law became virtually unrecognizable to those who had practiced it earlier. The source of this revision was the marginalist, or neoclassical, revolution in economic thought. The classical theory had seen corporate finance as an historical, relatively self-executing inquiry based on the classical theory of value and administered by common law courts. By contrast, neoclassical value theory was forward looking and as a result a much more realistic way of assessing a corporation's value; but it was also subject to a great deal more prediction and interpretation, and thus to more abuse. That possibility led the states first and later the federal government to respond with regulatory legislation.While marginalism effected a sweeping change in regulatory attitudes toward the corporation, the changes in the basic theory of corporate behavior, including finance, were at least as striking. The marginalist revolution turned the corporation into a rational actor intent on maximizing value. Neoclassical corporate finance theory unambiguously choose marginalist price theory rather than welfare economics as the source of its working assumptions, thus guaranteeing the irrelevance of not only the individual shareholder but also of managers. Or to say it differently, the neoclassical concept of the corporation did not merely separate ownership from control; it separated corporate decision making from all human preference whatsoever, unless those preferences were simply asserted to be maximization of value. Within the neoclassical model the separate human identities of shareholders or even managers came to matter only under the rubric of agency costs, which were regarded as nothing more than an imperfection in the neoclassical corporate ideal.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125228257","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}
Sale-and-repurchase transactions (“repos”) are financing transactions used primarily to transfer cash from one party, typically a party that wants to lend money on a short-term secured basis, to a second party, in exchange for (usually) highly rated and very liquid securities like U.S. Treasury obligations that are temporarily transferred from the second party to the first party. They are an essential component of the capital markets, regularly used by the Federal Reserve Bank of New York, financial institutions and institutional investors. Trillions of dollars worth of repos are outstanding at any moment in time. One might think, as a result, that the U.S. tax rules for repos are well-established and non-controversial.In the case of repos on securities that are subject to non-U.S. withholding tax, however, that is not the case. Examples of repos of this kind are repos on stock that pays dividends subject to withholding tax and repos on corporate bonds that pay interest subject to withholding tax. An important question for repos of this kind is which party to the repo is treated as paying the withholding tax, because that is the taxpayer that is entitled to credit or otherwise benefit from the tax. Ordinarily the tax rules treat the same taxpayer that earns income that is subject to withholding tax as the taxpayer liable for the tax – that is, the income and the related tax are both attributable to the same taxpayer. This article first discusses the current U.S. tax rules that apply to repos of this kind. It then describes a proposal that the government has made to change (or, arguably, clarify) current law (under section 901 of the Internal Revenue Code) in a way that could prevent the taxpayer that earns the interest or dividends on a repoed security from obtaining a credit or other benefit from the related withholding tax, by treating different taxpayers as earning the income and paying the tax (a “foreign tax credit splitter”). Foreign tax credit splitters are generally considered contrary to good tax policy. The article then discusses several other provisions of the Code that the government might use to fix the foreign tax credit splitter problem that it has proposed to create (sections 901(k), 901(l) and newly enacted section 909), and concludes that these rules do not solve the problem. The article ends by recommending a modest change to the government’s section 901 proposal to clarify the law and provide appropriate rules for conventional repo transactions.
出售和回购交易(“回购”)是一种融资交易，主要用于将现金从一方(通常是想以短期担保的方式借钱给另一方)转移到另一方，以换取(通常)高评级和流动性很强的证券，如美国国债，这些证券暂时从另一方转移到第一方。它们是资本市场的重要组成部分，经常被纽约联邦储备银行(Federal Reserve Bank of New York)、金融机构和机构投资者使用。价值数万亿美元的回购在任何时候都是未偿还的。因此，有人可能会认为，美国对回购的税收规定是完善的，没有争议的。在对非美国证券进行回购的情况下。然而，预扣税并非如此。这类回购的例子有:支付股息的股票回购，需缴纳预扣税;支付利息的公司债券回购，需缴纳预扣税。这类回购的一个重要问题是，回购的哪一方被视为支付预扣税，因为有权享受抵免或从税收中受益的是纳税人。通常情况下，税收规则将赚取应缴纳预扣税的收入的同一纳税人视为应纳税的纳税人，也就是说，收入和相关税款都应归属于同一纳税人。本文首先讨论适用于这类回购的现行美国税收规则。然后，它描述了政府提出的一项提案，该提案旨在改变(或者可以说是澄清)现行法律(根据《国内税收法》第901条)，通过将不同的纳税人视为赚取收入并缴纳税款(“外国税收抵免分割者”)，以防止从相关预扣税中获得利息或股息的纳税人获得抵免或其他利益。外国税收抵免者通常被认为与良好的税收政策背道而驰。然后，本文讨论了政府可能用来解决其提议创建的外国税收抵免分割问题的法典的其他几个条款(第901(k)条，第901(l)条和新颁布的第909条)，并得出结论，这些规则并不能解决问题。文章最后建议对政府的第901条提案进行适度修改，以澄清法律，并为传统的回购交易提供适当的规则。
{"title":"Repos, the Technical Taxpayer Rules, and Foreign Tax Credit Splitter Rules (Section 909)","authors":"E. Nijenhuis","doi":"10.2139/SSRN.1799479","DOIUrl":"https://doi.org/10.2139/SSRN.1799479","url":null,"abstract":"Sale-and-repurchase transactions (“repos”) are financing transactions used primarily to transfer cash from one party, typically a party that wants to lend money on a short-term secured basis, to a second party, in exchange for (usually) highly rated and very liquid securities like U.S. Treasury obligations that are temporarily transferred from the second party to the first party. They are an essential component of the capital markets, regularly used by the Federal Reserve Bank of New York, financial institutions and institutional investors. Trillions of dollars worth of repos are outstanding at any moment in time. One might think, as a result, that the U.S. tax rules for repos are well-established and non-controversial.In the case of repos on securities that are subject to non-U.S. withholding tax, however, that is not the case. Examples of repos of this kind are repos on stock that pays dividends subject to withholding tax and repos on corporate bonds that pay interest subject to withholding tax. An important question for repos of this kind is which party to the repo is treated as paying the withholding tax, because that is the taxpayer that is entitled to credit or otherwise benefit from the tax. Ordinarily the tax rules treat the same taxpayer that earns income that is subject to withholding tax as the taxpayer liable for the tax – that is, the income and the related tax are both attributable to the same taxpayer. This article first discusses the current U.S. tax rules that apply to repos of this kind. It then describes a proposal that the government has made to change (or, arguably, clarify) current law (under section 901 of the Internal Revenue Code) in a way that could prevent the taxpayer that earns the interest or dividends on a repoed security from obtaining a credit or other benefit from the related withholding tax, by treating different taxpayers as earning the income and paying the tax (a “foreign tax credit splitter”). Foreign tax credit splitters are generally considered contrary to good tax policy. The article then discusses several other provisions of the Code that the government might use to fix the foreign tax credit splitter problem that it has proposed to create (sections 901(k), 901(l) and newly enacted section 909), and concludes that these rules do not solve the problem. The article ends by recommending a modest change to the government’s section 901 proposal to clarify the law and provide appropriate rules for conventional repo transactions.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"301 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121282380","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 : 2011-02-18DOI: 10.7916/CBLR.V2011I3.2914
Branden Carl Berns
Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to bring greater transparency to extractive-related payments made to governments by resource extraction issuers required to report to the Securities and Exchange Commission. It does so by requiring resource extraction issuers to disclose non-de minimus payments made to foreign governments to further the commercial development of oil, natural gas, or minerals. There is substantial concern among industry participants that companies subject to Section 1504 may be placed at a competitive disadvantage vis-a-vis companies not subject to the reporting requirements. This Note, focusing on the oil and gas industry, identifies the major companies that will be subject to the regulation, the potential competitive disadvantages that they may face, and whether these companies can credibly threaten to leave U.S. equity markets in response to the regulation. This Note argues that the failure of Section 1504 to achieve broad coverage of oil and gas companies will place regulated companies at a competitive disadvantage with respect to their unregulated competitors. This Note analyzes the international stock exchange participation of the top fifty oil and gas companies and finds that, in response to these competitive disadvantages, certain companies may delist from U.S. exchanges.
《多德-弗兰克华尔街改革与消费者保护法》第1504条旨在提高资源开采发行人向美国证券交易委员会(Securities and Exchange Commission)报告的资源开采相关支付给政府的透明度。它通过要求资源开采发行人披露为促进石油、天然气或矿产的商业开发而向外国政府支付的非最低金额款项来实现这一目标。行业参与者非常担心，与不受报告要求约束的公司相比，受第1504条约束的公司可能处于竞争劣势。本文主要关注石油和天然气行业，确定了将受到监管的主要公司，他们可能面临的潜在竞争劣势，以及这些公司是否可以可信地威胁退出美国股市以应对监管。本文认为，第1504条未能实现石油和天然气公司的广泛覆盖，将使受监管的公司相对于不受监管的竞争对手处于竞争劣势。本文分析了排名前50位的石油和天然气公司在国际证券交易所的参与情况，并发现，为了应对这些竞争劣势，某些公司可能会从美国交易所退市。
{"title":"Will Oil and Gas Issuers Leave U.S. Equity Markets in Response to Section 1504 of the Dodd-Frank Act? Can They Afford Not To?","authors":"Branden Carl Berns","doi":"10.7916/CBLR.V2011I3.2914","DOIUrl":"https://doi.org/10.7916/CBLR.V2011I3.2914","url":null,"abstract":"Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to bring greater transparency to extractive-related payments made to governments by resource extraction issuers required to report to the Securities and Exchange Commission. It does so by requiring resource extraction issuers to disclose non-de minimus payments made to foreign governments to further the commercial development of oil, natural gas, or minerals. There is substantial concern among industry participants that companies subject to Section 1504 may be placed at a competitive disadvantage vis-a-vis companies not subject to the reporting requirements. This Note, focusing on the oil and gas industry, identifies the major companies that will be subject to the regulation, the potential competitive disadvantages that they may face, and whether these companies can credibly threaten to leave U.S. equity markets in response to the regulation. This Note argues that the failure of Section 1504 to achieve broad coverage of oil and gas companies will place regulated companies at a competitive disadvantage with respect to their unregulated competitors. This Note analyzes the international stock exchange participation of the top fifty oil and gas companies and finds that, in response to these competitive disadvantages, certain companies may delist from U.S. exchanges.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"2002 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114208870","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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