Kaal claims by topic: law-and-legal-systems

537 atomic, individually citable claims from the published work of Wulf A. Kaal tagged law-and-legal-systems.

The authors propose that private ordering can design an adjudication system for European corporate law better than public ordering by Member States that are marketing their corporate laws to managers and investors abroad. 2004
Delaware itself acknowledges the utility of unbundling statutes from adjudication, though not in its corporate law: its LLC statute specifically allows members or managers to agree in writing to arbitration of claims under the LLC agreement. 2004
European lawyers may advise clients to incorporate at home simply because those lawyers do not want to deal with the courts and lawyers of another Member State, which suppresses cross border incorporation independently of statute quality. 2004
No Member State currently has courts specializing in corporate law comparable to the Delaware Court of Chancery, and establishing such courts or upgrading existing ones would be expensive for most Member States, with high marginal costs as usage grows. 2004
The two sources that finance Delaware's bundled package, franchise taxes and legal fees for local counsel, might not be as lucrative for a European Member State, so the expensive package of statutes plus adjudication may have no viable funding model. 2004
Conflict of laws problems become more complex and pose a much greater threat to the entire system of regulatory competition once a jurisdiction markets its corporate law as a separate product under Type B competition. 2004
A single body of arbitrators affiliated through an association is better positioned than the courts of separate Member States to develop a systematic and consistent approach to the conflict of laws problems unique to the incorporation theory. 2004
None of the Delaware based solutions, whether importing bundled or unbundled Delaware law, is likely to be viable for Europe. 2004
Member States should provide in their corporate statutes an arbitration enabling provision allowing corporate charters to mandate arbitration of internal affairs disputes instead of adjudication in national courts. 2004
Compensating arbitrators by the number of cases they hear gives litigants a substantial role in shaping the system but may yield decisions so eager to please all parties that they lack decisiveness, sound reasoning and value as precedent. 2004
Arbitration of corporate governance disputes has not emerged in the United States because arbitration is at best the next best alternative to Delaware, and a second place finish does not justify the investment needed to design a workable arbitration framework. 2004
Europe has no equivalent of Delaware with which arbitration would have to compete, since incorporation theory is only beginning to take hold and no Member State has established a commanding lead in marketing its corporate law abroad. 2004
One objection to arbitration of corporate governance disputes holds in Europe as in the United States: arbitration as ordinarily used yields little relevant precedent. 2004
Expert judges in national courts who cannot understand the arguments of lawyers before them or read documents written in another language may not be experts at all, so the American model of state appointed expert corporate judges does not transfer to multilingual Europe. 2004
Unless the Member State of incorporation specifically provides in its corporate statute that arbitration is permissible when allowed in the charter or a shareholders agreement, investors run the risk that courts refuse to enforce the arbitration provision. 2004
In securities regulation the SEC has continuously expanded its extraterritorial reach, and it has done so with strong support from the judiciary, most notably the Second Circuit Court of Appeals. 2010
The Second Circuit's conduct and effect test was too unpredictable, and a clear rule keyed to the location of the securities transaction would be more predictable for issuers and investors. 2010
Allowing foreign plaintiffs to sue foreign defendants in US courts over securities purchased and sold in foreign countries would turn the United States into the global arbiter of securities fraud allegations. 2010
Because many countries choose to combat securities fraud through government enforcement rather than private litigation, the United States should respect the right of other countries to regulate their own markets. 2010
Section 7216 of the Wall Street Reform and Consumer Protection Act of 2009 would extend federal antifraud jurisdiction to conduct within the United States constituting significant steps in furtherance of a violation, even when the securities transaction occurs abroad and involves only foreign investors. 2010
If section 7216 is enacted and covers section 10(b), the United States could become a magnet for global class actions, and US lawyers would benefit from securities litigation tourism much as UK lawyers have benefited from libel tourism. 2010
Foreign cubed cases in US courts rose over the decade preceding 2010, and in 2008 the number of such cases exceeded any previous year. 2010
The lack of securities class actions in European jurisdictions creates a void that increases the incentives for forum shopping by plaintiffs' lawyers. 2010
Over time, extraterritorial US securities litigation may drive European jurisdictions to adopt portions of US law in order to discourage forum shopping, a form of legal assimilation. 2010
Assimilation of US legal rules into European regulatory approaches may itself increase transaction costs for the jurisdiction that changes its law. 2010
For European jurisdictions the extraterritorial application of US law creates confusion and legal uncertainty and makes it harder to regulate private parties who engage in regulatory arbitrage by taking their litigation to the United States when convenient. 2010
Applying section 10(b) and Rule 10b-5 together with the fraud on the market theory substantially increases the potential liability of issuers and can lead to questionable results, which is why EU jurisdictions may not want that rule applied to their securities markets. 2010
Section 7216 could have the opposite effect of forcefully exporting US law onto other jurisdictions including Europe, even though it would be preferable for other nations to decide for themselves whether to have a class action litigation system. 2010
Overlapping regulation and inconsistent legal rules create uncertainty, so that individual board members of European companies and their attorneys will not know which legal rules apply or what effects those rules may have. 2010
Legal uncertainty generates transaction costs, and European company boards will inevitably incur costs minimizing the information asymmetries created by different legal regimes that may or may not apply to their company. 2010
Relative to the total number of US securities fraud and securities class action cases, foreign cubed cases are still relatively rare, although there was a substantial increase in them in 2008. 2010
Enactment of section 7216 could make foreign cubed cases an integral part of the legal landscape in the United States and hence in Europe, ending the current situation in which most European companies are unaware of or unconcerned with that risk. 2010
Banks, brokers and other financial intermediaries figure in a large proportion of US securities fraud cases because they often have the deep pockets that plaintiffs' lawyers are looking for. 2010
If section 7216 extends US securities fraud provisions to non-US securities transactions, European financial intermediaries could become the dominant target for plaintiffs' attorneys. 2010
If section 7216 is enacted, European plaintiffs and defendants will likely turn to the expertise of American law firms, which would further exacerbate the already difficult competitive situation of European law firms. 2010
If Congress enacts section 7216, EU investors will on the whole probably earn a lower return on their investments than they otherwise would, because the substantial costs the US litigation system imposes on EU companies will be passed on to investors. 2010
Section 7216 could be one more impediment to good diplomatic relations if the United States is perceived as establishing its courts as international courts in securities matters with universal jurisdiction. 2010
Although the business judgment rule is articulated differently in the two countries and German law leaves somewhat more room to challenge risky decisions, in both the United States and Germany the rule is highly protective of corporate managers. 2010
The same combination of substantive and procedural rules imposes different monitoring costs in different cultural settings, so a rule package that is cheap in one country can be expensive in another. 2010
Limited liability lets managers and shareholders capture most of the benefits of excessive risk taking while not bearing all of its costs, which is one explanation for why bankers take excessive risk. 2010
Because U.S. law frames the inquiry around corporate waste, and most risk taking does not meet the waste standard, showing that a decision was hazardous or excessively risky is not enough to rebut the business judgment rule in the United States. 2010
The U.S. requirement that directors act on an informed basis is watered down because many states permit charter provisions exculpating directors from liability for breach of the duty of care, including the duty to act on an informed basis. 2010
In In re Citigroup the Delaware Court of Chancery refused to extend the Caremark oversight duty, which concerns monitoring for illegal conduct, into oversight liability for business risk, so an inability to predict the future and an incorrect evaluation of business risk are not breaches of a director's oversight responsibilities. 2010
The United States compensates for its lenient corporate law treatment of risk taking under the business judgment rule with a comparatively strict disclosure regime and a robust securities class action litigation regime; substantive corporate law pushes the monitoring requirement toward leniency while securities enforcement pushes it back toward stringency. 2010
In the United States the duty to disclose risk indirectly generates risk monitoring, because directors who know they are responsible for disclosing risk have reason to monitor it even though corporate law imposes no explicit duty to monitor. 2010
The German legislature enacted the VorstAG on the premise that managers who emphasize short term parameters lose sight of the corporation's long term benefit and are thereby incentivized to take irresponsible risks, and it accordingly required compensation reduction in a corporate crisis, a D&O deductible, and deferred payout of performance based pay. 2010
Dodd-Frank's mandatory risk committee is a significant change because most boards then delegated risk oversight to the audit committee, and it may generate new litigation if committee composition or alleged committee failure becomes a basis for shareholder suits. 2010
Delaware courts have not explicitly imposed a duty to monitor risk, but that omission may be moot: because failing to disclose risk violates federal securities law, unmonitored risk is likely to become undisclosed risk and therefore actionable. 2010
German corporate law permits increases in voting rights only in very limited circumstances, such as grandfathered multiple voting shares, so the proposed voting rights increase would require statutory reform in Germany. 2011
Regulating entities that operate in the same markets under asymmetric rules creates legal uncertainty and significant transaction costs. 2011
A lack of regulatory guidance creates legal uncertainty, and legal uncertainty in turn generates transaction costs. 2011
Because the AIFM Directive exposes depositaries to strict liability in certain circumstances, depositaries must weigh the risks and benefits of serving EU alternative investment funds, and a negative assessment would harm the depository business and, implicitly, hedge funds. 2011
Legislators had disincentives to impose harsher requirements on the hedge fund industry before the crisis, because harsher regulation could have driven franchise taxes and other business to offshore centers. 2011
Before Morrison, U.S. courts refused to adopt a bright line rule for the extraterritorial reach of Section 10(b), and the resulting case by case conduct and effects analysis was applied inconsistently. 2011
Morrison provides no clear parameters for classifying privately negotiated transactions as domestic or foreign, because the case involved publicly traded securities and never reached the question. 2011
If Section 10(b) were held to reach swap agreements based on stocks traded outside the United States, plaintiffs' attorneys would use that holding as precedent to limit Morrison broadly, and other courts might create a general exception for U.S. derivative contracts referencing non-U.S. securities. 2011
On its face Section 929P(b) of the Dodd-Frank Act addresses only the jurisdiction of the district courts and does not expand the geographic scope of the substantive provisions of U.S. securities law. 2011
Extending private rights of action extraterritorially would expose non-U.S. companies to Section 10(b) liability based on any U.S. conduct, including conduct inside U.S. business operations alleged to have produced securities fraud abroad, and much of global securities litigation would migrate to the United States. 2011
Because of the ambiguities in Morrison and Dodd-Frank and the consequences of a broad reading for persons and companies in European and other jurisdictions, Congress should clarify its intent in Section 929P(b) with respect to SEC and DOJ suits over securities transactions outside the United States. 2011
A clear and restrained U.S. approach to extraterritoriality will bring predictability to global securities markets and avoid a downturn in international economic cooperation. 2011
The authors identify a drafting defect in the proposed CRD IV Regulation: the distinction drawn by financial institution in Article 51(a) is ambiguous and the cross reference to the institution referred to in point (a) of Article 87 is unclear and indeterminate, so the provision requires clarification or amendment. 2012
Because German law fixes no threshold conditions or determining factors for market reception or market confidence, the systemic relevance and contagion determinations that turn on those factors can never be made in a reliable and objective manner. 2012
The German Banking Act requirement that a bridge bank have its head office inside Germany is of highly questionable compatibility with European Union law, specifically the principle of free movement of capital under Article 63 TFEU. 2012
Enacting the proposed German Corporation Act amendments that would give contingent capital securities a statutory basis would require substantial changes across other areas of German law, and is unlikely to be achieved unless European Union law requires it and the standards are internationally recognized. 2012
After Morrison, parties to securities transactions can be confident that U.S. law will not apply in private suits so long as their transactions are definitively located outside the United States, a certainty that did not exist under the prior conduct and effects tests. 2012
The authors stipulate that Choice of Law Competition is a subcategory of jurisdictional competition in which jurisdictions compete on substantive legal rules to attract contracting parties ex ante, with adjudication of disputes a secondary consideration. 2012
The authors stipulate that jurisdictions which take steps only to expand the jurisdiction of their courts as venues for litigation, rather than to attract transactions, engage in Forum Competition. 2012
Most Forum Competition turns on a jurisdiction's attractiveness to lawyers ex post: such jurisdictions ignore the preferences of transacting parties at the time of contracting and appeal only to the preferences of some parties and their lawyers after a dispute has arisen. 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 can fail on the merits: the harmonious rule may be the wrong rule for the problem it addresses, or it may become the wrong rule later as circumstances change. 2012
Jurisdictional competition in global securities litigation after Morrison will be bifurcated, because some jurisdictions recognize private rights of action while others do not, and some, including the United States, extend government enforcement extraterritorially where private suits are barred. 2012
Government enforcement acts as a backstop that makes the case for choice of law freedom stronger: allowing parties to choose their legal regime is more defensible when bad choices, such as moving transactions to regimes with little regulation, do not thwart government enforcement. 2012
Geographic tests create the risk of a no man's land transaction: defendants may persuade the courts of every jurisdiction that the transaction took place outside their borders, leaving the transaction governed by no law and with no available forum. 2012
In Converium the Amsterdam Court of Appeal declared an international collective settlement binding on the parties even though the class members had only tenuous connections to the Netherlands. 2012
The Second Circuit's Absolute Activist test, locating a transaction where title transfers or irrevocable liability is incurred, is easy to manipulate: parties can arrange for irrevocable liability to arise outside the United States, for example by conditioning liability on approval by an agent located abroad. 2012
The authors propose a rule under which, unless a transaction is unambiguously inside the United States, the transaction is not inside the United States if the parties have expressly stated that intent; this can be harmonized with both Morrison and the existing statutory framework. 2012
The race to the bottom objection to a contract based approach is weaker than assumed because a race to the bottom requires the consent of both buyers and sellers, and the objection assumes that buyers will simply accept whatever securities law sellers choose. 2012
The SEC, rather than the courts or Congress, is the institution positioned to implement a choice of law regime for securities transactions, through rulemaking. 2012
U.S. courts have only a limited capacity to integrate parties' choice of law into a post-Morrison regime for defining transaction location, and adding variables raises the risk of inconsistent case law across districts and circuits. 2012
A contract selecting non-U.S. securities law can fail entirely: if the chosen jurisdiction's courts decline jurisdiction because the transaction did not clear there or the parties lack a local presence, the contract may as a practical matter mean that no law applies. 2012
Choice of law should replace the geographically based transactional test in those circumstances where geography is ambiguous. 2012
Although many jurisdictions may protect investors less well than the United States, it is not at all certain that U.S. law does a better job of deterring securities fraud. 2012
Before Dodd-Frank the perimeter of hedge fund regulation was set by SEC no-action letters on client counting and by courts that gave very limited and sometimes contradictory guidance, so compliance rested on an unstable and uncertain base rather than on rules. 2012
Losing the private adviser exemption imposed a bundle of obligations, disclosure duties and code of ethics requirements on top of inspections and record keeping, and the direct consequence was significantly higher legal fees for hedge funds. 2012
This Article reports the first survey study of hedge fund advisers conducted after the SEC's registration effective date, drawing on a population of 1267 private fund advisers who registered before March 30, 2012. 2012
The hedge fund industry's concern with confidentiality and privacy is itself an obstacle to empirical research: it made obtaining a substantial effective sample size for this study difficult, independent of the survey design. 2012
Persistent multi-channel follow-up, by fax, e-mail, and telephone, yielded ninety-four completed surveys, a 7.42% response rate from a population of 1267, which is substantially higher than response rates in prior surveys of this industry. 2012
The standard remedies for selection bias are not reliably corrective: simulation studies show that many techniques used to prevent selection bias problems have mixed success rates, can worsen rather than improve estimates, and may skew results under ordinary circumstances. 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
Where jurisdictions are not compelled to agree on the same rule, some jurisdiction will try a different rule, and will do so more quickly, when changed economic circumstances make a different rule optimal. 2012
The nearly insurmountable standard for liability in oversight cases in the United States undermines the signalling of the expected standard of conduct, and this could have long-term implications for American corporate law. 2013
Without a workable duty of oversight, corporate directors who seek to comply with the oversight duty lack meaningful guidance about the conduct expected of them. 2013
Under Delaware law as applied in In re Citigroup, directors' incorrect evaluation of business risk and their inability to predict the future do not violate the duty of oversight, so the Caremark duty to monitor is not extended to business risk. 2013
Losses alone are not sufficient to hold directors personally liable for taking risks that lead to those losses, because risk is inherent in maximizing shareholder value. 2013
Oversight liability in Delaware can be established only on a showing that the directors knew they were not discharging their fiduciary duties or consciously disregarded their responsibilities. 2013
Delaware's signalling of expected conduct is undermined when the state simultaneously imposes a near insurmountable standard for liability in cases involving breaches of the duty of oversight. 2013
Courts often provide very specific language about the standard of conduct expected of directors, but lawyers do not sufficiently communicate that expected conduct to directors. 2013
Directors who are inadequately informed about the expected standard of conduct will underestimate their personal liability exposure and engage in riskier behavior than is desirable for the company itself. 2013
Under German law, directors' business decisions lose the protection of the business judgment rule where the business risk taken was inappropriately excessive, a standard German courts announced in ARAG/Garmenbeck. 2013
German commentators, whose expertise German courts rely on heavily, concluded after the financial crisis that managers do not act reasonably under the German business judgment rule if the risks they take on behalf of the corporation result in the demise of the corporation. 2013
Comparative corporate law research is challenging and may include inaccuracies because countries differ in legal history, legal origins, and legal cultures. 2013
Despite the limits of the comparison, had In re Citigroup and Disney been decided in Germany the allocation of liability would have been different, because German courts are generally more willing than Delaware courts to second-guess directors' decisions. 2013
The different legal standards for allocating liability in Germany and the United States illustrate rather different legal and societal attitudes toward managers' risk-taking. 2013
Delaware's signalling of expected conduct could be dramatically improved by adopting a moderate rather than near insurmountable standard for liability in cases involving breaches of the duty of oversight. 2013
If the liability standard were lowered, directors and officers would take their increased personal liability exposure into account and could be incentivized to engage in less risky behavior. 2013
Increasing oversight liability would give courts an opportunity to clarify the oversight doctrine, so that it could evolve into a mature and coherent doctrine rather than remaining immature and incoherent. 2013
Increased liability is no panacea and cannot alone adequately address the central shortcomings of the duty of oversight and of corporate governance in the United States, because heightened liability does not give part-time outside directors the capacity to monitor complex corporations. 2013
Cost increases and path dependencies may make it nearly impossible to relax the close to insurmountable standard for liability in oversight cases. 2013
Rulemakers discount or willingly accept unknown future contingencies and the inevitable need for later revision, amendment, and retraction, because they are pursuing certainty and predictability in the rules they enact. 2013
Experimentation with different combinations of regulatory approaches is effective when several different approaches can be tried simultaneously in different jurisdictions. 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
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
Because dynamic regulation supplies information ex-ante via a feedback process before rules are finalized, certainty for involved parties is not affected ex-post after rules become effective, so contractual incompleteness is lowered while certainty in rulemaking is maintained. 2013
Old Bankruptcy Rule 2019 was applied inconsistently in practice, with courts interpreting it with a high degree of variability both across and within jurisdictions. 2013
The growing number of conflicting decisions under old Rule 2019, and the confusion and uncertainty they produced, is what precipitated the concerted effort by bankruptcy practitioners and the federal bankruptcy bench to revise the rule. 2013
Revised Rule 2019 clarifies some of the ambiguities of the old rule, but uncertainty and confusion about its application remain inevitable. 2013
Restricting Form PF data to the eyes of the bankruptcy judge alone would create problems in the litigation process, because opposing parties may demand access to the same information. 2013
The liability standard for breach of fiduciary duty is set so high that courts rarely find directors in violation, because only a board's sustained or systematic failure to exercise oversight can produce liability. 2013
Because directors contractually agree to increase compliance through an open door policy for the government, CIAs substantially raise the liability risk for companies whose directors did not act in accordance with their fiduciary responsibilities. 2013
Although CIAs sit outside the formal legal framework that defines fiduciary duties, they belong to the penumbra of extra legal forces that clarifies what is expected of directors. 2013
Because state fiduciary duty law is permissive rather than regulatory, fiduciary standards can legitimately develop from non-legislative sources, which makes extra legal forces a proper source for shaping fiduciary duties. 2013
CIA penalties reach individuals as well as entities: firms supervised by the FDA may not employ persons dismissed for CIA violations, and the careers of pharmaceutical directors and officers prosecuted over CIA violations can be severely damaged. 2013
As the number of individuals required to certify compliance under CIAs grows, so does the potential for false certifications and the corresponding liability, including False Claims Act and criminal false statement exposure. 2013
CIAs often become the benchmark for expected conduct in a subsequent civil or criminal trial, which distinguishes them from ordinary contractual arrangements between companies and the government. 2013
Boards are consistently held not liable for their companies' illegal marketing efforts even though federal law prohibits off-label marketing, but a board that certifies compliance with a CIA is certifying that the company properly monitors its sales teams' promotional activities, so CIAs contractually expand the applicable legal standard. 2013
When a company operates under a CIA, the judicial distinction between the law and aspirational corporate governance becomes less clear. 2013
In re Pfizer stipulates that for a company that executed a CIA the court will allow an assumption that the directors were fully informed and therefore willing participants in the corporate malfeasance, so that the CIAs themselves became the court's proof that the directors could have breached their fiduciary duties. 2013
Courts assume that the boards of companies that executed a CIA have more knowledge and can exercise more control, and therefore hold those directors to a heightened fiduciary duty, rejecting directors' claims of ignorance because executing a CIA or a CIA like agreement means directors do know or should know about the noncompliance. 2013
It is unclear whether corporations with CIAs will be uniformly affected, and future courts are likely to expand the basic legal duty of care only where the facts suggest that the CIA actually provided directors with more knowledge about compliance activities. 2013
Because CIAs have so far been used predominantly in the health care industry, and because that industry has a public or quasi-public good character, the application of CIAs outside health care could be limited, and without broader application their impact on corporate law may be limited as well. 2013
Governmental contracts are contractual arrangements between the government and a corporate entity under which the government imposes sanctions and institutional changes in exchange for foregoing further investigation and corporate criminal indictment. 2014
Prior scholarship, including the author's own earlier work, established that Form PF created core challenges for the private fund industry but did not clarify what impact the disclosure requirements actually have on managers; this study is designed to fill that gap. 2014
The near identity between respondents who reported completing Sections 2 through 5 of Form PF and respondents who reported quarterly filing shows the answers are internally consistent, which the author treats as evidence that the survey responses carry above average reliability. 2014
Once prosecutors have investigated and identified corporate wrongdoing, non and deferred prosecution agreements let them avoid an expensive trial against a sophisticated and well funded corporate defendant, which is one reason both sides have strong incentives to settle. 2014
Existing corporate criminal liability combined with the absence of clear Department of Justice standards for charging businesses can push organizations to adopt unproven compliance programs and generate other inefficiencies. 2014
The increasing execution of non and deferred prosecution agreements since 2002 has raised the overall regulatory burden borne by the corporate entities subject to them. 2014
The cooperation requirements documented in this study are likely to produce an increasing need for corporations and their counsel to anticipate prosecutorial actions in advance. 2014
This is the first study to examine stock price reactions to non- and deferred prosecution agreements, using all publicly available N/DPAs across several industries from 1993 to 2015 (N=330). 2015
The market values N/DPA governance changes during the term because those changes effectively address the underlying corporate wrongdoing and its damage to goodwill and reputation while reducing the likelihood of continuing fines and litigation. 2015
The existing literature has barely engaged the financial market implications of N/DPAs, which is the gap this study fills. 2015
Private party litigation against hedge fund managers stays minimal because well counseled managers make extensive disclosures to investors who are presumed sophisticated, unlike mutual fund advisers who face ongoing high value investor suits. 2016
The most widely recognized drawbacks of traditional rulemaking under the Administrative Procedure Act are its lack of speed, its cumbersomeness, and the volume of litigation generated by its notice and comment procedures. 2016
The pacing problem is partly a byproduct of the goal of legal certainty: because regulation is designed to be a durable source of predictability, rulemaking driven by legal certainty cannot keep pace as innovation accelerates. 2016
Addressing the regulatory issues created by innovation outpacing law through the judiciary is insufficient in the face of exponential innovation, because increasing evidence shows courts cannot sufficiently counterbalance the shortcomings of the legislative system. 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
Litigation in the court system can take years, which increases the likelihood that courts will not react in a timely manner, much less in real time, to exponential innovation. 2016
Dynamic regulatory mechanisms are already replacing litigation and will continue to replace it. 2016
Deferred prosecution agreements produce relevant, real time, decentralized, high quality information for regulation in most industries and are used as a preferred alternative to litigation by both prosecutors and corporations. 2016
The downsides of principles based regulation are a costly and time consuming transition from rules based regulation, uncertainty, and compliance problems that follow from that uncertainty. 2016
Dynamic regulatory mechanisms avoid legal uncertainty better than principles based regulation because in the dynamic framework rulemaking follows feedback processes that are transparent to both the affected industries and the regulators. 2016
Dynamic regulatory tools lower unforeseen contingencies in innovation related rulemaking because their feedback effects supply relevant, timely, decentralized, and institution specific information ex ante, which also helps maintain certainty in the rulemaking process. 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
Because artificial intelligence is not recognized as a subject of law in national or international law, it has no legal personality and therefore cannot be personally liable for damages it causes. 2016
Rulemakers' inability to address disruptive innovation will generate high levels of legal uncertainty and inconsistency that inhibit innovation during technological transition, and technological transition is likely to become a permanent state, so the inhibiting effect becomes permanent too. 2016
Dynamic regulatory supplements would not violate the procedural mandates of the Administrative Procedure Act, because the full lawmaking process still applies; dynamic regulation supplements rather than replaces the existing rulemaking process. 2016
The study rests on two datasets: SEC Form ADV Part II filings by private investment fund advisers from 2007 to 2014 (N=100392) and the publicly available litigation record on private fund investor due diligence from 1995 to 2015 (N=572). 2016
Almost no guidance exists on the standards applicable to private fund investor due diligence, so despite the growing importance of due diligence in capital formation and in litigation the industry is left mostly to its own devices to ensure adequate standards. 2016
The existing resources fail on both sides: industry materials describe best practices without setting out the legal requirements for private fund due diligence, and the available case law provides only marginal guidance. 2016
Because a material omission or misstatement in Form ADV Part 2A can support a serious securities law charge, private fund managers have an incentive to keep the narrative language of that required disclosure as high level, summary, and non committal as possible. 2016
Litigation research on private fund due diligence requires in depth evaluation of case dockets rather than only published judicial decisions, because opinions are snapshots that do not tell the whole story of a case. 2016
Legal decisions involving private fund due diligence increased substantially after 2005 and especially after 2008, and the broad, narrow, and hand selected case categories all increased consistently with a slight lapse in 2014. 2016
While some courts found that a complete lack of investor due diligence can amount to securities fraud or breach of contract, and that lacking due diligence can breach fiduciary duties, the majority of courts evaluate private fund due diligence issues in the context of misrepresentation. 2016
Successful claims based on lacking investor due diligence typically require a complete failure to perform due diligence despite explicit promises to perform it; promising due diligence and then conducting none except in isolated incidents is actionable misrepresentation. 2016
Relying solely on a representation by the investment or the fund, without actually performing due diligence, is sufficient to present a fact issue on fraud to a jury. 2016
Deficient due diligence does not create securities fraud liability unless it is intentional or highly reckless; conduct that is merely negligent or professionally incompetent falls short of the scienter requirement. 2016
Defendants owe a duty to use reasonable care in conducting financial due diligence consistent with the standards of care in the profession. 2016
As a contractual matter, due diligence promises made in a brochure, on a website, or in a contract with investors must be in writing to be enforceable. 2016
Failure to supervise and direct investment of assets in accordance with an investment plan's policy, together with offering memoranda or quarterly letters that misrepresent due diligence processes, can show a failure to exercise reasonable care sufficient to plead breach of fiduciary duty. 2016
Madoff's reliance on large feeder funds created a massive industry of investor due diligence lawsuits, because those funds collected high advisory fees as due diligence experts yet caused large numbers of investors to lose their investments. 2016
Claims in which investors use hindsight to second guess due diligence practices often fail, even when the manager was clearly incompetent. 2016
Funds that promise due diligence with no intention of actually carrying it out violate federal securities laws rather than merely breaching a contract. 2016
The legal standards applicable to private fund investor due diligence are somewhat inconsistent and suboptimal and merit clarification. 2016
The data suggest that since 2010 private fund advisers increasingly engage in investor due diligence in order to protect themselves from investor criticism and lawsuits. 2016
Madoff related cases following the discovery of the Ponzi scheme in 2008 only partially explain the significant increase in the prevalence and importance of private fund investor due diligence after 2009. 2016
Despite bringing enforcement actions over misrepresentations about due diligence, the SEC has not taken a rigid enforcement position on whether particular due diligence industry practices are effective, and has merely acknowledged that practices became more robust after the financial crisis. 2016
The investor verification requirement defeats the purpose of the Rule 506(c) liberalization: fearing liability for investor misrepresentations of personal wealth, most hedge funds raising money from individuals continue to use old Rule 506 rather than Rule 506(c). 2016
Firms that outsource the chief compliance officer role to third parties face heightened SEC scrutiny and examination risk, and the SEC has signaled that CCO liability arises where CCOs mislead regulators, engage in affirmative misconduct, or fail to carry out assigned compliance responsibilities. 2016
Survey research on private fund advisers is structurally constrained because these advisers traditionally oppose publicity and hold a strong preference for confidentiality and privacy, which makes a substantial effective sample size difficult to obtain. 2016
Neither the 2012 nor the 2015 sample is biased, and the comparison across the two populations is consistent because respondents in both surveys were equally subject to Title IV compliance obligations. 2016
Rather than outsourcing required compliance work, the industry is on some metrics increasingly performing that work in-house, a shift consistent with the SEC's emphasis on compliance officer liability and post-2012 enforcement actions aimed at compliance departments. 2016
The survey achieved a response rate of 5.44 percent from a population of 1267 registered private fund advisers. 2016
Artificial intelligence cannot be held personally liable for damage it causes because national and international law do not currently recognize it as a subject of law, so compensation must be forced through existing provisions never designed for it. 2016
Disruptive innovative technology frequently does not fit the legal categories created by recalcitrant regulatory structures, so the classification problem itself is a source of regulatory failure. 2016
Rulemakers' inability to address the regulatory issues raised by disruptive innovation will generate high levels of legal uncertainty and inconsistency, and that uncertainty inhibits innovation during technological transition periods. 2016
Technological transition will be a permanent state in the age of disruptive innovation, so the uncertainty and inconsistency caused by rulemakers' inability to react in time is a standing condition rather than a transitional cost. 2016
Dynamic regulatory supplements do not violate the procedural protections mandated by the Administrative Procedure Act, because the full lawmaking process still applies and dynamic regulation only supplements and optimizes the existing rulemaking process. 2016
The authors concede a limitation of their own proposal: the innovation potential identified by venture capital finance allocation may not always be shared by the market at large. 2016
Smart contracting on the blockchain often makes legal contracting unnecessary because smart contracts emulate the logic of legal contract clauses. 2017
Smart contracting on blockchain platforms often makes legal contracting unnecessary, because smart contracts emulate the logic of legal contract clauses. 2017
Business, administrative and legal services that consist of keeping ledgers, such as notary and registry services, legal motions practice, and title companies, are likely to be among the first services eliminated by blockchain adoption. 2017
Smart contracts face a legal enforceability risk: they may be attacked as void and unenforceable, because contract law rules on formation, interpretation, conditions and remedies were not written for coded agreements and require substantive adjustment. 2017
Blockchain creates a data protection paradox: the technology itself offers strong privacy protection, yet storing blockchain data across a global network of nodes will often violate specific consumer protection rules and directives in individual jurisdictions. 2017
The absence of regulatory recognition of blockchain technology is itself a source of harm: it creates significant uncertainty, hinders cross industry implementation, and undermines infrastructure conversion via blockchain. 2017
Fears that technologically untrained judges will misunderstand blockchain are overstated, because blockchain is no different from other software that courts have already evaluated, and courts assisted by well trained attorneys should be able to appreciate its significance. 2017
Managers of funds that exist only as smart contracts in cyberspace, with no foreign or domestic domicile, cannot assume they are judgment proof; the more likely outcome is that they must comply with more regulations, not fewer, because every node location can trigger a jurisdiction. 2017
LendingRobot can charge only a one percent management fee and a maximum 0.59 percent fund expense fee because its business model removes the investment adviser, overhead costs, and the legal fees attached to each individual investor agreement. 2017
The absence of regulatory recognition of blockchain technology is itself a source of harm: it creates significant uncertainty for the blockchain community and undermines the evolution of the crypto economy. 2017
Regulatory uncertainty around blockchain has three specific sources: insufficient or non existent regulatory guidance, the absence of court decisions, and uncertainty over which jurisdiction applies. 2017
Jurisdiction over the public blockchain does not exist within the present doctrinal infrastructure for jurisdiction, and in practice the blockchain cannot be regulated or governed because it is decentralized and autonomous. 2017
Traditional jurisdictional tests fail for blockchain because the concepts of location and presence do not apply: the blockchain has no location, physical or electronic, and no single node holds the entire chain. 2017