Kaal claims by topic: institutional-design

879 atomic, individually citable claims from the published work of Wulf A. Kaal tagged institutional-design.

The Societas Europaea has drawn a less than enthusiastic initial reaction, plausibly because its rules are the product of years of negotiation and political compromise rather than a response to market forces. 2004
Mobility costs for a corporation are probably higher when changing the jurisdiction of incorporation means changing not only the applicable corporate law but also the courts that will apply it. 2004
Conducting judicial proceedings through interpreters is cumbersome and confusing and creates a perceived bias in favor of litigants and lawyers fluent in the language of the proceedings, which is a barrier to exporting adjudication. 2004
The weak link in a bundled package offered by a civil law Member State is likely to be its system of adjudication rather than its statute. 2004
Because the English common law system is gravitating toward a civil law approach that weights statutes more heavily than judicial interpretation, the value of a bundled package of statutes plus adjudication even in a European common law jurisdiction may not greatly exceed the value of the statutes standing alone. 2004
With an unbundled product more Member States might participate in regulatory competition over corporate law, which would speed up the learning process and likely result in better substantive corporate law. 2004
If statutes are unbundled from adjudication the judicial bias problem largely disappears, because statutes are at least facially neutral and discriminatory statutes would violate the EU treaty. 2004
To the extent judges are biased toward expansively interpreting the reach of their own Member State's corporate law, corporations may unexpectedly be bound by rules of the state of incorporation on subject matter they believed lay outside corporate law. 2004
Because the judiciary in many European jurisdictions is a specialized career entered shortly after university and without significant private practice experience, European judges lack the practice background that facilitates learning to adjudicate complex corporate disputes. 2004
Error correction is weak for Member State corporate law adjudication: national legislatures are unlikely to intervene unless judicial error affects domestic interests, so managers and investors would rather face slow learning judges in their home country. 2004
Choosing another Member State's courts as the forum can silently strip substantive rights: if the forum state treats an unavailable remedy such as money damages as procedural and refuses to hear the claim, the charter has opted out of substantive law of the state of incorporation that ordinarily could not be waived. 2004
Because rating agencies are paid by CDO issuers while the ratings' main users are buyers, the agency as agent has an incentive to issue high ratings to satisfy its issuer principal, and the buyer has no means of controlling the agency other than through its relationship with the issuer. 2009
Because industry practices and informal rules already protect their relationships and investments, qualified investors may neither desire nor require extended investor protection rules to optimize hedge fund valuation. 2009
Investor suitability standards are the author's preferred regulatory option because they would probably protect retail investors' interests without unduly burdening the hedge fund industry and other market participants. 2009
Unless an investor's business is primarily to invest in hard-to-value assets, that investor's sophistication cannot be assumed regardless of personal wealth. 2009
Congress intended the federal securities laws to cover only purchases and sales of securities that occur within the United States, a conclusion the authors reached with twenty-one law professors after reviewing the legislative history. 2010
The significant steps standard of section 7216 is probably broader than the Second Circuit's conduct and effect test, and the proposed statutory language would therefore reach a wider range of defendants. 2010
A European company retains some ability to avoid the Sarbanes-Oxley Act by declining to list its securities in the United States, an escape route that expansive extraterritorial securities litigation would close. 2010
Overlapping regulation must be distinguished from conflicting regulation: only conflicting regulation could violate international law, because the territorial integrity of a state is breached only where there is a specific true conflict in the substantive legal norms of the respective states. 2010
Contingent capital offers only limited protection against information asymmetries, principal and agent conflicts, and collective action problems, so it cannot by itself prevent economic failure. 2011
Letting national regulators keep their existing Tier 1 capital definitions creates a collective action problem: countries with stricter definitions appear to have less capital and thinner cushions than countries with broader ones. 2011
Requiring financial institutions to sell high volumes of contingent capital securities, on the order of four to nineteen percent of risk weighted assets, could raise pricing pressure and increase their cost of funding. 2011
To balance constituent incentives and prevent abuse, the voting rights increase should be calibrated so that contingent capital holders obtain a majority stake only in combination with the largest institutional shareholder. 2011
A substantial voting rights increase at the second trigger could raise the cost of contingent capital securities, with issuers demanding premiums that push primary issuance toward institutional investors interested in the change of control possibility. 2011
Reorganization through contingent capital eliminates the holdout problem, because the majority of contingent capital holders, or those holders together with shareholders, determine governance after conversion, so a lone dissenter cannot collect more than other creditors. 2011
An institution or a country creates externalities when it manages its own hedge fund generated systemic risk without considering how its actions or inactions affect risk in the system as a whole. 2011
Even if hedge fund investing does have systemic implications, systemic risk is multifaceted enough that addressing it could require more than one regulator in a single jurisdiction, so the SEC alone may be unable to accomplish the task. 2011
Discrimination against non-EU jurisdictions under the AIFM Directive could provoke retaliatory action, and retaliation combined with a lack of intra-European cooperation could damage the European financial services industry and the whole European economy. 2011
The numerical wealth requirements used to define qualified hedge fund investors fail as a regulatory device, because investors who meet the wealth thresholds do not always have the knowledge, understanding, and sophistication needed to invest in highly complex financial instruments. 2011
The plaintiffs' reading that Section 10(b) covers transactions anywhere in any security of a class listed on a U.S. exchange is inconsistent with Morrison, because the opinion turns on the location of the transaction and on the holding that Section 10(b) has no extraterritorial application. 2011
Morrison itself refutes a listing based reading of Section 10(b): the Court knew that National Australia Bank had registered and listed shares in New York, yet held that Section 10(b) did not reach trades in those ordinary shares in Australia. 2011
There is no substantive difference between a foreign issuer listing ADRs on a U.S. exchange and listing its ordinary shares there, so Section 10(b) coverage of foreign transactions should not turn on which arrangement the issuer chose. 2011
The Supreme Court should have summarized its Morrison holding in language matching the opinion's logic, namely that Section 10(b) applies only to securities bought or sold in the United States; the Court's summary language instead invited confusion. 2011
Judge Baer's dismissal of the Porsche complaint reaches the correct result under Morrison, but parts of his reasoning require further refinement. 2011
The Porsche swap transactions were not the functional equivalent of a transaction on a U.S. securities exchange, but neither were they the functional equivalent of a transaction on a German exchange, contrary to the implication of Judge Baer's opinion. 2011
If the presence of a single U.S. party sufficed to locate a privately negotiated derivative transaction in the United States, U.S. parties could sue in U.S. courts regardless of other factors such as where the counterparties were located. 2011
Locating a private transaction by the location of the parties is often unworkable, because the parties are frequently institutions simultaneously present in the United States and abroad, and individual parties are often in transit. 2011
Given the defects of a party location analysis, courts should de-emphasize where the parties are and instead use a totality of the circumstances approach to determine where a privately negotiated derivative transaction took place. 2011
Non-U.S. investors have a strong incentive to route foreign trades through U.S. brokers if that preserves a U.S. cause of action, because their home jurisdictions rarely offer the attractive features of the U.S. system such as broad discovery, higher damages, class actions, and no exposure to defendants' costs. 2011
Porsche could be exposed to substantial U.S. sanctions even though neither its own common stock nor Volkswagen's traded in the United States, solely because of swap agreements to which Porsche was not a party. 2011
Unless courts can construe Morrison for swap agreements and other derivatives consistently with both the logic and the language of the opinion, Congress will have to enact new clarifying legislation. 2011
The Second Circuit should uphold Judge Baer's ruling on a totality of the circumstances basis and explain more fully how those circumstances determine the location of a swap agreement under Morrison. 2011
There is a substantial likelihood that U.S. courts will read the Dodd-Frank Act as giving some extraterritorial effect to SEC and DOJ suits, so Morrison cannot be expected to survive intact in actions brought under Section 929P(b). 2011
Read as more than a jurisdictional grant, the Dodd-Frank provision becomes an open-ended statute rather than the targeted authority the SEC already held under Section 10(b) and Section 30, and it is undesirable for the SEC to use such powers unilaterally without consulting foreign regulators and the U.S. foreign policy establishment. 2011
Section 929P(b) risks complications where the SEC proceeds unilaterally in situations in which coordinated enforcement with foreign regulators would be more effective, for example insider trading cases involving exchanges whose home regimes do not recognize comparable insider trading rules. 2011
A private right of action in foreign-cubed cases would compel EU companies to modify U.S. business operations that expose them to Section 10(b) litigation, including operations unrelated to U.S. securities markets or U.S. investors. 2011
Regardless of what the SEC study concludes, Congress should decline to reinstate private rights of action in foreign-cubed cases. 2011
Because most national crisis responses took the form of public bail-outs adopted without broad international consensus, they increased the threat of international regulatory arbitrage and damaged the global competitiveness of national financial markets. 2012
Mutual recognition of countercyclical capital buffers hollows out the national discretion the Commission proposal appears to grant: the financially strongest Member States with the largest financial sectors will effectively set the buffer size for smaller Member States whose institutions do business there. 2012
Even the residual national discretion to set countercyclical buffers between 2.5 and 5 percent is misleading, because a Member State such as the United Kingdom is unlikely to sustain a 5 percent buffer while Germany requires only 2.5 percent and thereby hands German banks a competitive advantage. 2012
The methodological assumptions of incomplete contract theory improve the analysis of executive compensation arrangements relative to the classical and spot contract models normally used. 2012
Institution-specific automatic triggers are the preferred basis for early trigger designs because they are flexible and independent of regulatory discretion. 2012
Contrary to Gordon's view that contingent convertible bonds do not address the Fuld Problem, if executive packages do not include a large equity portion, managers have no incentive to block an equity infusion in order to preserve the value of their own equity. 2012
Jurisdictional competition adapts legal rules to changed economic circumstances faster than harmonization does, because a single jurisdiction can change its rule unilaterally whereas harmonized regimes require all jurisdictions to agree on a rule before it can change. 2012
Harmonization invites its own defeat by creating an incentive for rogue jurisdictions to attract, into their legal systems, the private actors who do not agree with the harmonized rule. 2012
Defined geographic borders for securities transactions, the overarching assumption behind Morrison, are an unstable basis for limiting the extraterritorial reach of either private litigation or government regulation. 2012
Without an opt-out mechanism, European class sizes will likely be substantially smaller than their U.S. counterparts, which in turn depresses settlement amounts and damages awards. 2012
The German KapMuG does not relieve trial judges of deciding the legal issues in every individual case, so it remains administratively burdensome even though its model case judgment binds the trial courts. 2012
The WCAM's requirement that a court evaluate procedural and substantive fairness and the efficiency of the settlement lets the Dutch system avoid blackmail settlements, where a defendant pays simply to escape endless proceedings and reputational loss. 2012
The Converium fee holding is a weak predictor of Dutch practice because lead counsel's work in that case was performed largely within the American legal system and by U.S. law firms, so it remains to be seen whether a case litigated in Dutch courts without U.S. exposure would yield a comparable fee structure. 2012
The Netherlands is already Europe's most attractive venue for collective settlements because it is the only European country that allows a collective settlement in mass litigation to bind all class members who do not opt out. 2012
The WCAM requirement that a court approved foundation pursue the action makes the Dutch regime more burdensome than the U.S. system, which requires only a lead plaintiff and class approval. 2012
The WCAM's structural limits could reduce the number of successful settlements: while the largest cases such as Shell and Fortis give plaintiffs enough leverage to force large settlements, smaller cases may not be successfully settled in Dutch courts. 2012
If Forum Competition between the United States and Europe expands, the acceptable outer bounds of jurisdictional competition may eventually have to be defined by treaty or other multilateral agreement. 2012
The client counting safe harbor, which let an adviser count a pooled entity rather than each investor as a single client, allowed advisers to manage large amounts of securities indirectly for several hundreds of investors across multiple hedge funds while remaining outside registration and supervision. 2012
Combined with other corporate governance mechanisms, contingent capital securities function as an internal, institution specific mechanism that could fill the void left by regulators' apparent inability to supervise financial institutions effectively. 2012
The combination of demonstrated investor interest and an underdeveloped regulatory structure in the United States presents a unique opportunity to experiment with contingent capital designs and with their application to the corporate governance of systemically important financial institutions. 2012
Harmonization and coordination can facilitate experimentation and learning, but experimentation is most effective when several different approaches are tried simultaneously in different jurisdictions. 2012
Rather than banning purchases by systemically important institutions of each other's contingent capital, which could be detrimental to market evolution, the design should require disclosure of the purchaser's identity and approval by the issuer. 2012
Following enactment, governance adjustments are often later repealed or diluted, and anticipation of future developments plays no significant role in the top down approach to regulation. 2013
Governance adjustments enacted via stable rules in reaction to financial crises are inevitably followed by relaxation, revision, and retraction of those rules. 2013
Financial regulation is characteristically enacted only in the aftermath of financial crises rather than in advance of them. 2013
Initiatives for sustainable financial regulation are largely missing, because anticipation of unknown future contingencies and preemption of possible future crises play no significant role either in the current regulatory framework or in the literature on financial regulation. 2013
Financial regulation is characterized and controlled by a classic collective action problem, and as a consequence regulatory oversight is never constant. 2013
In the competition to shape financial policy through rulemaking, small and well organized special interest groups such as the financial industry dominate latent groups such as dispersed investors. 2013
During and after crises, political entrepreneurs assume the transaction costs of organizing otherwise disinterested latent groups, which temporarily overcomes the predominance of special interest groups in rulemaking. 2013
Once crises recede, regulatory oversight diminishes as societies and markets return to their prior equilibrium, and this dichotomy causes reform legislation and deregulatory legislation to be enacted in quick succession. 2013
The regulatory sine curve is the pattern of governance adjustments made in reaction to financial crises together with the inevitable relaxation, revision, and retraction of the rules enacted as part of that adjustment. 2013
In the absence of crises the intensity of regulation diminishes, because regulators cannot commit to long-term regulatory strategies and instead fall back on private strategies such as self-regulation to overcome resource constraints. 2013
The regulatory expansion that follows crises inevitably leads to amendments, revisions, and retractions of the previously established rules. 2013
The partial repeal of Section 404 of Sarbanes-Oxley through the Dodd-Frank Act illustrates that broad rules enacted during times of political expediency are often later retracted. 2013
Foreign issuers began delisting from United States exchanges after the enactment of Section 404 of Sarbanes-Oxley and identified that section as a leading cause of their decision to delist. 2013
The Jumpstart Our Business Startups Act exemptions for emerging growth companies from Section 404(b), from say-on-pay, and from pay ratio disclosure illustrate the post-crisis easing of constraints imposed on the financial services industry. 2013
Rulemaking with dynamic elements increases the adaptive capabilities of financial regulation through the increasing use of institution specific information, including information on how financial institutions and their decision makers actually act and are expected to react to unforeseen contingencies. 2013
The social and mental properties of decision makers in financial institutions, combined with the incentive structure of the respective institutional setup, determine a financial institution's adaptive capability. 2013
The core problem for financial regulation is timing: governance improvements are not enacted before crises when they are most needed, because the collective action problem makes financial regulation mostly reactive and tied to business cycles. 2013
A contingent capital triggering event signals that management was unable to manage the entity so as to avoid the trigger, and therefore signals to rulemakers that regulatory action may be needed, information regulators cannot obtain by monitoring debt to equity and capital adequacy ratios alone. 2013
Dynamic regulation is an optimization process for the learning experience in the New Institutional Economics framework, describing intra- and inter-jurisdictional feedback effects between different public rulemakers and between private and public rulemakers. 2013
Dynamic elements in the rulemaking process increase the availability of relevant information for rulemaking and thereby improve institutional design. 2013
Dynamic regulation as part of institutional design in the evolution of law has not been systematically analyzed, despite an existing economics literature applying dynamic regulation to telecommunications, learning by doing, and principal-agent problems. 2013
The institutional infrastructure for rulemaking was designed for a relatively stable society and stable economic and market environments, and it therefore fails to keep pace with rapidly evolving and increasingly complex modern markets. 2013
The feedback effect between different public rulemakers and between private and public rulemakers reduces incomplete information, which in turn enables the rulemaker to modify the next action in the rulemaking process. 2013
Rules with suboptimal characteristics are themselves the product of institutional arrangements and reinforce those suboptimal institutional arrangements and rulemaking processes, creating a self-perpetuating feedback loop. 2013
Even institutional arrangements that produce optimal governance solutions generate solutions that become suboptimal over time, necessitating rule revision, updating, and revocation. 2013
Rules that lack adaptability to future states of the world reinforce the very institutions and processes that produce suboptimal outcomes. 2013
Rules can be adaptable only if the institutions and rulemaking processes that produce them integrate dynamic elements that generate timely, relevant, and decentralized information for rulemaking. 2013
Dynamic regulation is a form of Popper's piecemeal social engineering rather than holistic or utopian social engineering, because it is a piecemeal optimization process for institutional design with a largely private character. 2013
Under dynamic regulation a presumption of reform feasibility is unnecessary because the feedback effect makes ad-hoc decisions obsolete, curtailing centralized planning and minimizing unintended actions. 2013
Because feedback effects increase the availability of relevant, decentralized, and timely information, rulemakers can predict unforeseen contingencies and adjust their actions ex-ante to avoid complex reforms and unwanted consequences. 2013
Opportunities for integrating dynamic elements into the rulemaking process include intra-jurisdictional feedback processes, feedback effects between private and public rulemakers, inter-jurisdictional feedback processes, informal rules, and organizational culture. 2013
Parties subject to informal rules signal their preferences and efficient solutions to the public rulemaker, so informal rules and practices supply additional information that modifies rulemakers' actions and improves rulemaking. 2013
Unenforceable rules are irrelevant for purposes of economic analysis because they provide neither incentives nor sanctions, and legal rules without enforcement mechanisms do not qualify as institutions in the NIE framework. 2013
Congressional studies do not remedy regulators' informational disadvantage because they mostly follow after Congress has already identified concerns and may not provide real-time relevant information before regulatory action is necessary. 2013
The feedback process between public and private rulemakers increases the availability, timeliness, and quality of information available to the public rulemaker, which induces and supports a learning process and creates incentives for that learning. 2013
Competition between legislators does not necessarily provide a feedback process in the sense of cooperation, but it nevertheless provides incentives for public rulemakers to consider regulatory solutions from other jurisdictions. 2013
Because competition between legislators requires public rulemakers to meet consumers' and legal addressees' quality expectations and preferences, it adds a dynamic and market-driven element with a feedback effect to the rulemaking process. 2013
Consumer opt-out from existing rules creates a feedback effect for the public rulemaker: when a critical mass of opt-outs signals that a different rule may be optimal, it triggers a modification of the rulemaker's next action. 2013
Information exchange between agents of public rulemakers, such as regulators, will not necessarily involve decentralized information, unlike feedback effects between private and public rulemakers. 2013
Contractual incompleteness can be lowered through dynamic processes within the rulemaking process, because dynamic elements improve the availability, timeliness, and quality of information via the feedback process. 2013
A classic collective action problem controls rulemaking: smaller and better organized special interest groups usually dominate latent groups such as dispersed investors in the competition to shape rules. 2013
During and after crises, political entrepreneurs assume the transaction costs of organizing otherwise disinterested latent groups, temporarily overcoming the predominance of special interest groups in the rulemaking process. 2013
The collective action problem and the cyclical nature of rulemaking are likely to persist, which makes alternatives and supplements to existing institutional designs for rulemaking more relevant. 2013
Dynamic regulation should supplement existing institutional designs for rulemaking in order to counteract the negative consequences of cyclical rulemaking and improve corresponding institutional designs. 2013
Contracting parties need to postpone the specification of obligations only if the feedback process in the dynamic framework did not generate sufficient information; where sufficient information is available, contractual incompleteness can be lowered. 2013
The availability of information generated through the dynamic feedback process cannot be optimized at any given point in time, because the feedback effect is intended to perpetually reinforce itself. 2013
Parties in the incomplete contract model cannot adapt to unforeseen contingencies because they cannot specify ex-ante how those contingencies will be met, and transactions may be foregone or become too expensive if participants cannot rely on efficient and equitable adaptation. 2013
Dynamic regulation takes issue with the broad scope of contractual incompleteness and delayed decision-making assumed by the incomplete contract model, contesting the view that such incompleteness and delay are always necessary. 2013
Dynamic regulation helps rulemakers anticipate how institutions will react to circumstances as they arise, because the feedback process provides decentralized, timely, and institution-specific information, allowing rules to be adjusted ex-ante in anticipation of future contingencies. 2013
The broad scope for contractual incompleteness and delayed decision-making stipulated by the incomplete contract model are necessary only if the feedback effect did not produce sufficient information for rulemaking. 2013
The feedback process in dynamic regulation may be viewed as a focal point or principle for rulemaking, enabling rulemakers to provide for contingencies ex-ante and to adopt rules that are applicable and adaptable to future states of the world. 2013
The feedback effect in dynamic regulation, as part of the organizational culture of rulemaking, may allow cooperation and coordination not only among private actors but also among public rulemakers and between private and public rulemakers. 2013
The combination of multiple feedback processes results in a sequence of mutually-reinforcing, information-enhancing events that minimizes ex-post trial-and-error experimentation with stable rules after those rules have already emerged as failures. 2013
The IAA restricts the assignment of advisory contracts without client consent in order to protect investors against changes in the character or quality of the advisory services they contracted for. 2013
Proof of special compensation is a necessary condition for classifying a broker dealer as an investment adviser, and the burden of proving both special compensation and that the advice exceeded the incidental is on the plaintiff. 2013
Where a state does not provide sufficient regulation of mid-sized investment advisers, oversight reverts to the SEC, so state level regulatory gaps trigger a federal backstop rather than leaving advisers unsupervised. 2013
The OIG leverages providers' participation in federal health care programs, and the revenues that participation generates, to extract substantive CIA provisions that increase compliance with expected conduct and overall welfare. 2013
Outside the CIA context, oversight claims are the most difficult theory in corporation law on which to win judgment, and courts dismiss duty of care cases routinely at the pleading stage. 2013
The difference-in-differences treatment effect is unstable over time: it loses significance in June and July 2012, then becomes significant again in August and September 2012 with negative coefficients and in October 2012 with a positive coefficient. 2014
Dynamic regulation is a supplemental regulatory tool, not a replacement for existing rulemaking: it increases the availability of relevant, institution specific, and decentralized information for rulemaking through feedback effects. 2014
Dynamic elements function as an economizing device: they address the scarcity of regulatory resources and lower the cost of rulemaking by curtailing the collective action problem in rulemaking, the resulting regulatory cycles, and trial and error rulemaking. 2014
Because transaction costs, imperfect information, and bounded rationality shape the rulemaking process, even solutions that are optimal at enactment become unstable and suboptimal over time. 2014
Under incomplete contract theory the rulemaking process is itself a learning process, and incomplete contracts are the instrument that carries that learning. 2014
Because rulemaking is subject to regulatory cycles and to a classic collective action problem, rules are generally not enacted at the moment appropriate information for rulemaking becomes available. 2014
Interaction and exchange of emerging information between public and private rulemakers creates a feedback process that increases the availability, timeliness, and quality of information available to the public rulemaker. 2014
The existing framework of stable and presumptively optimal rules is self reinforcing: it perpetuates rulemaking processes that produce stable presumptively optimal rules and therefore keeps generating costly rule revision, updating, and revocation. 2014
Feedback effects allow the necessary information to be acquired ex ante and necessary revisions to be anticipated before rules emerge as suboptimal, rather than ex post after failure has become apparent. 2014
The shortcomings of the existing rulemaking framework cannot be adequately addressed from within that framework, because its structure rests on the assumption that rules ought to be stable and presumptively optimal. 2014
The inadaptability of stable and presumptively optimal rules intensifies competition between well organized special interest groups and latent groups, because inadaptable outcomes raise the stakes for both. 2014
Feedback processes associated with governmental contracts lower contractual incompleteness, because they raise the availability, timeliness, and quality of information while lowering the cost of contracting. 2014
Self reporting supplies institution specific information from which the government can identify governance shortcomings in the reporting entity and draw conclusions about regulatory needs across the entity's industry. 2014
Preemptive remedial measures have a low success rate, as evidenced by the fact that more than 60 percent of deferred and non prosecution agreements executed between 1993 and 2013 refer to preemptive remedial measures that preceded them. 2014
Negotiation of a governmental contract produces indirect information transfers, because the government can deduce from where the corporate wrongdoer places negotiating emphasis which governance shortcomings most need remedying. 2014
Regulators can extract industry specific guidance for rulemaking from the quantity of governmental contracts executed in a given industry and from the frequency of particular industry specific terms in those contracts. 2014
Three mutually reinforcing phases of governmental contracts, investigation and self reporting, negotiation of terms, and execution and enforcement, raise the quality and quantity of institution specific information and the extent to which insights transfer to other firms. 2014
The authors contest the conventional wisdom that a corporate criminal indictment amounts to a corporate death penalty, pointing to recent guilty pleas in which BNP Paribas paid a record fine and Credit Suisse kept its investment banking license. 2014
The McCallum Memorandum failed as a corrective because it only supplemented rather than replaced the Thompson Memorandum and did little if anything to curb the widespread use of attorney client and work product privilege waivers in deferred prosecution agreements. 2014
The McNulty Memorandum did not resolve the privilege waiver problem because it still left prosecutors ample opportunity to treat a corporate defendant's unwillingness to waive attorney client privilege as bearing on cooperation, and its attorney's fees provision had similar shortcomings. 2014
International regulators agree on designation criteria but not on the unit of assessment: the FSB and IOSCO assess systemic importance at the fund level while the OFR would assess it at the asset manager level with all funds combined. 2014
The FSOC's powers over nonbank financial institutions are broad and without precedent in United States financial regulation. 2014
SIFI designation changes the nature of regulation for a nonbank financial institution, subjecting it to substantial additional regulation and forcing it to change how it does business, which can in turn constrain its growth. 2014
The U.S. financial corporations subject to N/DPAs collectively exceed $690 billion in market capitalization and more than $20 trillion in assets under management, making N/DPA governance intervention economically consequential. 2015
The authors reject Hypothesis 1: they find no evidence that the market reacts negatively to the N/DPA announcement and the start of the term and positively to the end of the term, contrary to the cost-imposition view of N/DPAs. 2015
Market reaction to N/DPAs is industry specific, supporting the hypothesis that investors in some industries are more sensitive to N/DPA effects than investors in others. 2015
Regulatory convergence is not driven only by tightened post crisis rules: the liberalization of advertising restrictions after the Dodd-Frank Act also pushes hedge funds toward mutual fund form, so deregulation and reregulation work in the same convergent direction. 2016
The author stipulates that retail alternative funds are funds regulated under the Investment Company Act that attempt to replicate private fund strategies, including leverage, derivatives, short selling, and nontraditional asset classes; this definition carries the chapter's confluence analysis. 2016
The author stipulates the term nominal confluence: legal requirements that are formally identical for mutual and hedge fund managers but that operate in materially different ways in practice, so formal legal convergence overstates actual convergence. 2016
By tightening the accredited investor net worth standard, the Dodd-Frank Act pushes investors who lose eligibility for hedge fund investments toward hybrid and retail alternative funds, even if the number of affected investors is small. 2016
Amendments to Regulation SHO may deny mutual fund advisers certain hedging techniques, making it less likely that mutual funds can attract retail investors who are looking for alternative investment exposure. 2016
Systemic factors widen the divergence between regulation and innovation, including the political and ideological structures of the rulemaking process and the political gridlock of a two party system that impedes the passing of legislation. 2016
The doctrine of stare decisis and judicial adherence to precedent decided decades or centuries earlier mean the court system is structurally a suspension system for rapid change, built to supply stability and predictability rather than speed. 2016
Deferred prosecution agreements produce superior feedback effects for regulation because the prosecutor's investigation and the negotiation and execution of the agreement signal regulatory needs in real time. 2016
Early regulatory intervention becomes unnecessary in a dynamic regulatory framework, because the regulatory challenges associated with innovation would become transparent in real time through improved, decentralized information and feedback effects. 2016
In the dynamic regulatory framework, feedback effects and real time information permit regulatory intervention if and only when it is needed, which avoids stunting innovation through negative early signals, the inability to keep pace with later stage innovation, and information asymmetries. 2016
The United States lacks an anticipatory system at the national level because no mechanism exists for bringing foresight and policymaking into an effective relationship. 2016
Anticipatory rulemaking in the dynamic framework is accomplished by combining institution specific, decentralized, and timely information with feedback effects, which can occur between public and private rulemakers, between outcomes and institutions, across jurisdictions, and between rules and rulemaking processes. 2016
Rules operate as a feedback effect on the rulemaking process itself: rules with suboptimal characteristics result from institutional arrangements and then reinforce those suboptimal arrangements, and stable presumptively optimal rules reinforce an institutional structure that perpetuates stability in rules. 2016
Consumer choice adds a dynamic element to rulemaking because once consumers opt out of a suboptimal regulatory regime, public rulemakers in that jurisdiction can adjust their rulemaking in response, creating a feedback effect for the public rulemaker. 2016
Regulation of innovation in a dynamic framework is triggered only as a supplement to the existing rulemaking framework, and only if and when feedback effects anticipate otherwise unforeseen contingencies and regulatory needs associated with innovation. 2016
About 18 percent of hedge funds ceased operations in 2008, yet little evidence exists that these failures generated losses at prime brokers or other financial institutions, which weakens the direct transmission account of hedge fund systemic risk. 2016
Dynamic regulation is defined as conceptualizing regulatory phenomena in relation to both preceding and succeeding events, using institution-specific and decentralized information to generate feedback effects that support anticipatory rulemaking. 2016
Data derived from venture capital investments can function as a dynamic regulatory supplement for disruptive innovation, because venture capital's financial allocations to innovative projects supply feedback for dynamic regulation. 2016
The historically evolved rulemaking infrastructure could cope with its own collective action problems, regulatory cycles, and trial-and-error rulemaking without major disruption because the scope of regulatory issues was limited and institutional designs were consensus driven. 2016
The collective action problem of rulemaking, the problems of trial-and-error rulemaking, and the problems of regulatory cycles derive largely from the nature of stable and presumptively optimal rules themselves, not from unrelated institutional defects. 2016
Adaptive rulemaking helps overcome the collective action problem of rulemaking because when there are fewer stable rules, latent majority groups and dominant minority groups have fewer opportunities to influence a continuously and timely adapting process. 2016
Unrestricted exchange of information between public and private rulemakers creates regulatory synergies that increase the availability of relevant, decentralized, and timely information for rulemaking and thereby generate feedback effects. 2016
Through feedback effects, rulemakers in a dynamic regulatory framework can adopt rules that are adaptable to future states of the world rather than fixed to current conditions. 2016
Dynamic regulatory tools lower unforeseen contingencies in rulemaking because the feedback effect supplies relevant, timely, decentralized, and institution-specific information ex ante, allowing rulemakers to adapt to contingencies as they arise. 2016
A core problem for most regulation is its inaccurate and delayed timing, which follows from the collective action problem of regulation, path dependencies, and political inertia rather than from any single institutional defect. 2016
Feedback effects from venture capitalists' finance allocations toward innovative products give rulemakers timely, decentralized, industry-specific and entity-specific information that allows them to adapt rules in anticipation of regulatory issues. 2016
No regulatory processes or data evaluation capabilities currently exist that could carry out the cross-validated analyses and support the anticipatory regulatory action the authors propose. 2016
After the financial crisis of 2008 to 2009 and the Madoff scandal, relatively sophisticated investors stopped accepting the slanted phrasing of due diligence questionnaires and their answers, and the questionnaires became more rigorous as a result. 2016
Funds of funds claimed to select the best managers through skilled due diligence and charged standard 2 and 20 fee structures for that service, while in reality depositing the vast majority of their capital into Madoff's opaque fund. 2016
Because Madoff overtly disallowed scrutiny of his secretive and unconventional practices, it was impossible for feeder funds such as Rye to perform the due diligence they had represented to investors. 2016
Expert consensus in the examined litigation record converges on a set of standard due diligence practices, beginning with qualitative review of firm marketing materials, offering documents, subscription documents, and manager track records, and onsite manager meetings. 2016
Investment due diligence may start from the same basic questions as operational due diligence but is almost always idiosyncratic, because it targets the subject manager's investment process, which is typically unique to that manager. 2016
Qualifying for one of the Investment Company Act statutory exclusions, fewer than 100 investors or exclusively qualified purchasers, is what permits a hedge fund to use investment techniques such as shorting that are forbidden to registered investment companies. 2016
If Congress changes the tax treatment of carried interest, returns to hedge fund advisers and their investors are likely to fall markedly and the popularity of hedge funds will be severely tested. 2016
Hedge fund and private equity IPOs indicate that the historic contours of the industry as privately held, unregistered, and exempt funds are slowly changing as the industry becomes a more mainstream part of finance. 2016
Private fund underperformance may be a product of institutionalization: pension funds have increased their private fund holdings and institutions now make up over two thirds of the private fund investor base, up from 20 percent a decade earlier. 2016
As the private fund investor profile shifts toward institutional investors, fees fall; institutional investors made up 65 percent of hedge fund AUM in 2015 compared with roughly 20 percent a decade earlier. 2016
Underperformance combined with the influx of institutional money means that pension funds, endowments and other institutions, which now outnumber wealthy individuals as private fund investors, hold more bargaining power over fees. 2016
The majority of private fund advisers in the United States are not considering changing their assets under management in order to lower Dodd-Frank compliance costs, notwithstanding the $150 million registration threshold and the $1.5 billion Form PF quarterly reporting threshold. 2016
Because unconstrained mutual funds comply with the Company Act, they may be marketed and sold to all classes of retail investors, including those with limited or even no experience investing in securities. 2016
The SEC's interpretation of Section 18 leaves a mutual fund subject to no statutory limitation or cap on its ability to borrow through the use of derivative instruments, provided the fund adheres to its asset segregation obligations. 2016
Among the factors driving unconstrained mutual fund growth, the Dodd-Frank Act decreased the number of eligible private fund investors by raising the minimum net worth requirement for individuals to qualify as accredited investors. 2016
Retail investors may be led to believe that unconstrained mutual funds are safe relative to other fixed income mutual funds precisely because they are marketed, offered, and regulated as mutual funds, a risk that is unique to retail investors in these funds. 2016
Dynamic regulation is defined as the study of regulatory phenomena in relation to both preceding and succeeding events, using institution specific and decentralized information to generate feedback effects that support anticipatory rulemaking. 2016
Venture capital can function as a dynamic regulatory supplement for disruptive innovation because venture capitalists' financial allocations to innovative projects generate feedback that regulators can use. 2016
The existing regulatory infrastructure, including Congress, agencies, self regulatory bodies, and the regulation literature itself, relies almost exclusively on stable and presumptively optimal rules. 2016
Accepting suboptimal rules temporarily buys rule certainty and predictability but guarantees a later cycle of revision, amendment, and repeal, so rulemakers trade short term certainty for a costly correction process. 2016