Kathleen C. Engel and Patricia A. McCoy
- Published in print:
- 2011
- Published Online:
- April 2015
- ISBN:
- 9780195388824
- eISBN:
- 9780190258535
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:osobl/9780195388824.003.0013
- Subject:
- Business and Management, Political Economy
This chapter first explains how federal government bailouts during the subprime crisis increased the risk for more severe financial crises in the future. The government sent businesses the wrong ...
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This chapter first explains how federal government bailouts during the subprime crisis increased the risk for more severe financial crises in the future. The government sent businesses the wrong message that they can pursue senseless strategies in search of higher yields because Uncle Sam will absorb any losses if firms are too big to fail. In other words, the result of the bailouts was moral hazard. The chapter then discusses three ways to rein in too-big-to-fail firms and evaluates the capacity of the Dodd-Frank Act to perform these tasks. First, the law should require federal regulators to put failing financial giants into receivership before stabilizing them with federal aid. Second, the nation needs a systemic risk regulator to track and address looming systemic risks. Finally, swaps need to be moved onto exchanges as much as possible, while swaps that bet on the performance of assets owned by others should be banned.Less
This chapter first explains how federal government bailouts during the subprime crisis increased the risk for more severe financial crises in the future. The government sent businesses the wrong message that they can pursue senseless strategies in search of higher yields because Uncle Sam will absorb any losses if firms are too big to fail. In other words, the result of the bailouts was moral hazard. The chapter then discusses three ways to rein in too-big-to-fail firms and evaluates the capacity of the Dodd-Frank Act to perform these tasks. First, the law should require federal regulators to put failing financial giants into receivership before stabilizing them with federal aid. Second, the nation needs a systemic risk regulator to track and address looming systemic risks. Finally, swaps need to be moved onto exchanges as much as possible, while swaps that bet on the performance of assets owned by others should be banned.
Stephen M. Bainbridge
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199772421
- eISBN:
- 9780199932696
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199772421.003.0001
- Subject:
- Law, Company and Commercial Law
This introductory chapter begins with a brief review of the events that precipitated the passage of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes–Oxley) and the ...
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This introductory chapter begins with a brief review of the events that precipitated the passage of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes–Oxley) and the Wall Street Reform and Consumer Protection Act of 2010 (Dodd–Frank). It then discusses the meaning of corporate governance. It considers the economic crises that rocked the opening decade of the twenty-first century and corresponding federal responses. An overview of the subsequent chapters is also presented.Less
This introductory chapter begins with a brief review of the events that precipitated the passage of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes–Oxley) and the Wall Street Reform and Consumer Protection Act of 2010 (Dodd–Frank). It then discusses the meaning of corporate governance. It considers the economic crises that rocked the opening decade of the twenty-first century and corresponding federal responses. An overview of the subsequent chapters is also presented.
Marc I. Steinberg
- Published in print:
- 2018
- Published Online:
- March 2018
- ISBN:
- 9780199934546
- eISBN:
- 9780199361854
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780199934546.003.0005
- Subject:
- Law, Company and Commercial Law
In response to several corporate scandals, the Sarbanes-Oxley Act of 2002 (SOX) implemented substantive corporate governance mandates that were adopted as federal law. It focused on restoring ...
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In response to several corporate scandals, the Sarbanes-Oxley Act of 2002 (SOX) implemented substantive corporate governance mandates that were adopted as federal law. It focused on restoring financial disclosure transparency and revitalizing investor confidence in the financial markets’ integrity. A few years thereafter, the 2008 financial crisis precipitated the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). This Act aimed at forestalling another financial crisis through enhanced corporate governance regulation and placing meaningful restraints on undue risk-taking conduct. The chapter focuses on several key provisions of the SOX and the Dodd-Frank Acts, as well as SEC rules and regulations promulgated thereunder. Among these provisions as covered in this chapter are: CEO and CFO certifications, audit committees, executive clawback provisions, director independence, nominating and corporate governance committees, codes of ethics, corporate governance disclosures, say-on-pay and golden parachute provisions, loans to insiders, and equitable relief.Less
In response to several corporate scandals, the Sarbanes-Oxley Act of 2002 (SOX) implemented substantive corporate governance mandates that were adopted as federal law. It focused on restoring financial disclosure transparency and revitalizing investor confidence in the financial markets’ integrity. A few years thereafter, the 2008 financial crisis precipitated the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). This Act aimed at forestalling another financial crisis through enhanced corporate governance regulation and placing meaningful restraints on undue risk-taking conduct. The chapter focuses on several key provisions of the SOX and the Dodd-Frank Acts, as well as SEC rules and regulations promulgated thereunder. Among these provisions as covered in this chapter are: CEO and CFO certifications, audit committees, executive clawback provisions, director independence, nominating and corporate governance committees, codes of ethics, corporate governance disclosures, say-on-pay and golden parachute provisions, loans to insiders, and equitable relief.
Arthur B. Laby
- Published in print:
- 2013
- Published Online:
- January 2014
- ISBN:
- 9780199683772
- eISBN:
- 9780191763359
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199683772.003.0013
- Subject:
- Business and Management, Pensions and Pension Management
When buying stocks, bonds, mutual funds, and other securities, individuals seeking advice typically turn to broker-dealers or investment advisers before they invest. In many cases, brokers and ...
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When buying stocks, bonds, mutual funds, and other securities, individuals seeking advice typically turn to broker-dealers or investment advisers before they invest. In many cases, brokers and advisers perform similar functions but they are regulated differently under laws enacted during the Great Depression. Regulators are considering ways to harmonize the regulation of these professionals, but harmonization is fraught with difficulties. This chapter discusses the debate over harmonization and explains how the U.S. Securities and Exchange Commission, the courts, and Congress have responded. The chapter concludes with insights into considerations that will likely determine how the harmonization debate will be resolved.Less
When buying stocks, bonds, mutual funds, and other securities, individuals seeking advice typically turn to broker-dealers or investment advisers before they invest. In many cases, brokers and advisers perform similar functions but they are regulated differently under laws enacted during the Great Depression. Regulators are considering ways to harmonize the regulation of these professionals, but harmonization is fraught with difficulties. This chapter discusses the debate over harmonization and explains how the U.S. Securities and Exchange Commission, the courts, and Congress have responded. The chapter concludes with insights into considerations that will likely determine how the harmonization debate will be resolved.
Stephen M. Bainbridge
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199772421
- eISBN:
- 9780199932696
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199772421.001.0001
- Subject:
- Law, Company and Commercial Law
The years from 2000 to 2010 were bookended by two major economic crises. The bursting of the dotcom bubble and the extended bear market of 2000 to 2002 prompted Congress to pass the Sarbanes–Oxley ...
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The years from 2000 to 2010 were bookended by two major economic crises. The bursting of the dotcom bubble and the extended bear market of 2000 to 2002 prompted Congress to pass the Sarbanes–Oxley Act, which was directed at core aspects of corporate governance. At the end of the decade came the bursting of the housing bubble, followed by a severe credit crunch, and the worst economic downturn in decades. In response, Congress passed the Dodd–Frank Act, which changed vast swathes of financial regulation. Among these changes were a number of significant corporate governance reforms. This book asks two questions about these changes. First, are they a good idea that will improve corporate governance? Second, what do they tell us about the relative merits of the federal government and the states as sources of corporate governance regulation? Traditionally, corporate law was the province of the states. Today, however, the federal government is increasingly engaged in corporate governance regulation. The changes examined in this work provide a series of case studies in which to explore the question of whether federalization will lead to better outcomes. The book analyzes these changes in the context of corporate governance, executive compensation, corporate fraud and disclosure, shareholder activism, corporate democracy, and declining US capital market competitiveness.Less
The years from 2000 to 2010 were bookended by two major economic crises. The bursting of the dotcom bubble and the extended bear market of 2000 to 2002 prompted Congress to pass the Sarbanes–Oxley Act, which was directed at core aspects of corporate governance. At the end of the decade came the bursting of the housing bubble, followed by a severe credit crunch, and the worst economic downturn in decades. In response, Congress passed the Dodd–Frank Act, which changed vast swathes of financial regulation. Among these changes were a number of significant corporate governance reforms. This book asks two questions about these changes. First, are they a good idea that will improve corporate governance? Second, what do they tell us about the relative merits of the federal government and the states as sources of corporate governance regulation? Traditionally, corporate law was the province of the states. Today, however, the federal government is increasingly engaged in corporate governance regulation. The changes examined in this work provide a series of case studies in which to explore the question of whether federalization will lead to better outcomes. The book analyzes these changes in the context of corporate governance, executive compensation, corporate fraud and disclosure, shareholder activism, corporate democracy, and declining US capital market competitiveness.
Alan N. Rechtschaffen
- Published in print:
- 2014
- Published Online:
- May 2014
- ISBN:
- 9780199971541
- eISBN:
- 9780199361458
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199971541.003.0011
- Subject:
- Law, Company and Commercial Law
The 2008 near collapse of financial markets has been attributed to derivatives, particularly over-the-counter derivatives. The Wall Street Reform and Consumer Protection Act, also known as the ...
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The 2008 near collapse of financial markets has been attributed to derivatives, particularly over-the-counter derivatives. The Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act, was a response to the financial crisis and represented a profound shift in the regulation of financial institutions and markets in an obvious attempt to address regulatory shortcomings in derivatives markets. Dodd-Frank is intended to enhance regulatory oversight of derivatives and derivatives users and reduce counterparty risk and systemic risk. It establishes jurisdiction over derivatives that were previously unregulated. This chapter provides an overview of Dodd- Frank and its provisions concerning derivatives trading, jurisdiction and registration of swaps, clearing requirements, exchange requirements, and the end-user exemption. It also discusses capital and margin requirements, reporting requirements, and regulation of Futures Commission Merchants. Finally, it explains the rationale behind the exemptions and exclusions and looks at the criticisms of Dodd-Frank’s derivatives trading provisions.Less
The 2008 near collapse of financial markets has been attributed to derivatives, particularly over-the-counter derivatives. The Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act, was a response to the financial crisis and represented a profound shift in the regulation of financial institutions and markets in an obvious attempt to address regulatory shortcomings in derivatives markets. Dodd-Frank is intended to enhance regulatory oversight of derivatives and derivatives users and reduce counterparty risk and systemic risk. It establishes jurisdiction over derivatives that were previously unregulated. This chapter provides an overview of Dodd- Frank and its provisions concerning derivatives trading, jurisdiction and registration of swaps, clearing requirements, exchange requirements, and the end-user exemption. It also discusses capital and margin requirements, reporting requirements, and regulation of Futures Commission Merchants. Finally, it explains the rationale behind the exemptions and exclusions and looks at the criticisms of Dodd-Frank’s derivatives trading provisions.
Hal S. Scott
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780262034371
- eISBN:
- 9780262332156
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034371.003.0009
- Subject:
- Economics and Finance, Economic History
The Dodd–Frank Act placed important restrictions on the Fed's power as lender of last resort (LLR) to nonbanks under §13(3) as part of the post-crisis reaction that its lending constituted an ...
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The Dodd–Frank Act placed important restrictions on the Fed's power as lender of last resort (LLR) to nonbanks under §13(3) as part of the post-crisis reaction that its lending constituted an undesirable bailout of “Wall Street.” This chapter details these restrictions, which have substantially curtailed the Fed's ability to be an effective LLR in a future crisis, and have made the financial system much less stable. The following restrictions were placed on the Fed: (1) no loans can be made to single institutions—they must be part of a broad program approved by the Secretary of the Treasury; (2) all nonbank loans must be approved by the Secretary of the Treasury; (3) loans can only be made to solvent institutions; (4) discount window loans to banks cannot be used to fund their nonbank affiliates, like broker-dealers–instead loans to those affiliates must be authorized under §13(3); (5) new collateral requirements are imposed; and (6) all loans must be publicly disclosed within one year, and disclosed to congressional leaders in seven days.Less
The Dodd–Frank Act placed important restrictions on the Fed's power as lender of last resort (LLR) to nonbanks under §13(3) as part of the post-crisis reaction that its lending constituted an undesirable bailout of “Wall Street.” This chapter details these restrictions, which have substantially curtailed the Fed's ability to be an effective LLR in a future crisis, and have made the financial system much less stable. The following restrictions were placed on the Fed: (1) no loans can be made to single institutions—they must be part of a broad program approved by the Secretary of the Treasury; (2) all nonbank loans must be approved by the Secretary of the Treasury; (3) loans can only be made to solvent institutions; (4) discount window loans to banks cannot be used to fund their nonbank affiliates, like broker-dealers–instead loans to those affiliates must be authorized under §13(3); (5) new collateral requirements are imposed; and (6) all loans must be publicly disclosed within one year, and disclosed to congressional leaders in seven days.
Kathleen C. Engel and Patricia A. McCoy
- Published in print:
- 2011
- Published Online:
- April 2015
- ISBN:
- 9780195388824
- eISBN:
- 9780190258535
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:osobl/9780195388824.003.0012
- Subject:
- Business and Management, Political Economy
The subprime crisis showed that federal banking regulators cannot be relied on to put consumer safety over the interests of regulated banks. This chapter evaluates whether the Dodd-Frank Act achieves ...
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The subprime crisis showed that federal banking regulators cannot be relied on to put consumer safety over the interests of regulated banks. This chapter evaluates whether the Dodd-Frank Act achieves the goals that are critical to consumer protection. The Dodd-Frank Act transfers most of the responsibility for consumer financial protection from federal banking regulators to a new, dedicated agency called the Consumer Financial Protection Bureau (CFPB). The Act empowers the CFPB to establish rules for many aspects of mortgage lending. It also allows the states to protect consumers over and above the standards set by federal law. The chapter argues that although the Dodd-Frank takes bold steps toward protecting consumers, with the ultimate effect of reducing the threat of systemic risk, the consumer protection reforms do not eliminate that threat altogether.Less
The subprime crisis showed that federal banking regulators cannot be relied on to put consumer safety over the interests of regulated banks. This chapter evaluates whether the Dodd-Frank Act achieves the goals that are critical to consumer protection. The Dodd-Frank Act transfers most of the responsibility for consumer financial protection from federal banking regulators to a new, dedicated agency called the Consumer Financial Protection Bureau (CFPB). The Act empowers the CFPB to establish rules for many aspects of mortgage lending. It also allows the states to protect consumers over and above the standards set by federal law. The chapter argues that although the Dodd-Frank takes bold steps toward protecting consumers, with the ultimate effect of reducing the threat of systemic risk, the consumer protection reforms do not eliminate that threat altogether.
Stephen M. Bainbridge
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199772421
- eISBN:
- 9780199932696
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199772421.003.0005
- Subject:
- Law, Company and Commercial Law
Both Sarbanes–Oxley and Dodd–Frank included new executive compensation regulations. A key question is whether these provisions addressed actual corporate governance failures or were simply a sop to ...
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Both Sarbanes–Oxley and Dodd–Frank included new executive compensation regulations. A key question is whether these provisions addressed actual corporate governance failures or were simply a sop to populist outrage. In either case, one must also ask whether the new restrictions are likely to be effective. It is argued that the one-size-fits-all approach mandated by the Sarbanes–Oxley Act and the new self-regulatory organization listing standards is seriously flawed.Less
Both Sarbanes–Oxley and Dodd–Frank included new executive compensation regulations. A key question is whether these provisions addressed actual corporate governance failures or were simply a sop to populist outrage. In either case, one must also ask whether the new restrictions are likely to be effective. It is argued that the one-size-fits-all approach mandated by the Sarbanes–Oxley Act and the new self-regulatory organization listing standards is seriously flawed.
Hal S. Scott
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780262034371
- eISBN:
- 9780262332156
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034371.003.0006
- Subject:
- Economics and Finance, Economic History
The Dodd–Frank Act was the principal response of the United States to the 2008 financial crisis. Despite the fact that the crisis actually had little to do with asset connectedness, many of the most ...
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The Dodd–Frank Act was the principal response of the United States to the 2008 financial crisis. Despite the fact that the crisis actually had little to do with asset connectedness, many of the most important provisions of the Act are addressed to this form of systemic risk. This is not to say these policies are bad and may not address potential problems in the future, but contagion was the major problem in the crisis, and Dodd–Frank made this problem worse, not better. This chapter discusses some key provisions of Dodd–Frank that address connectedness: (1) the requirement for central clearing of over-the-counter derivatives; (2) the imposition of counterparty exposure limits; and (3) the designation of systemically important nonbank financial institutions.Less
The Dodd–Frank Act was the principal response of the United States to the 2008 financial crisis. Despite the fact that the crisis actually had little to do with asset connectedness, many of the most important provisions of the Act are addressed to this form of systemic risk. This is not to say these policies are bad and may not address potential problems in the future, but contagion was the major problem in the crisis, and Dodd–Frank made this problem worse, not better. This chapter discusses some key provisions of Dodd–Frank that address connectedness: (1) the requirement for central clearing of over-the-counter derivatives; (2) the imposition of counterparty exposure limits; and (3) the designation of systemically important nonbank financial institutions.
Hal S. Scott
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780262034371
- eISBN:
- 9780262332156
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034371.003.0010
- Subject:
- Economics and Finance, Economic History
The Fed's three major peers are the Bank of England (BOE), the European Central Bank, and the Bank of Japan (BOJ). This chapter begins with a description of the powers of the three peer central ...
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The Fed's three major peers are the Bank of England (BOE), the European Central Bank, and the Bank of Japan (BOJ). This chapter begins with a description of the powers of the three peer central banks. It then compares their powers with those of the Fed. It argues that institutionally the United States grants by far the weakest lender-of-last-resort (LLR) powers to its central bank, particularly with respect to nonbanks: (1) its independence is more fragile; (2) it is the only country with special limitations on lending to nonbanks as compared with banks; (3) it is the only country, outside the Eurozone, that makes no provision for loans to institutions the central bank does not judge as solvent; (4) while the BOE and BOJ require Treasury approval or direction for emergency lending, such requirements are likely to be much less politicized than the US Treasury approval of loans to nonbanks; (5) it is the only country that places restrictions on banks using discount window loans to support affiliates; (6) it is the only country requiring that there be a broad program for borrowing by nonbanks; and (7) it is the most aggressive country in requiring disclosure, thereby possibly inhibiting borrowers from borrowing due to the associated stigma. All but the first point results from changes by Dodd–Frank. This US weakness is not likely to be rectified in the near future given the politics surrounding bailouts.Less
The Fed's three major peers are the Bank of England (BOE), the European Central Bank, and the Bank of Japan (BOJ). This chapter begins with a description of the powers of the three peer central banks. It then compares their powers with those of the Fed. It argues that institutionally the United States grants by far the weakest lender-of-last-resort (LLR) powers to its central bank, particularly with respect to nonbanks: (1) its independence is more fragile; (2) it is the only country with special limitations on lending to nonbanks as compared with banks; (3) it is the only country, outside the Eurozone, that makes no provision for loans to institutions the central bank does not judge as solvent; (4) while the BOE and BOJ require Treasury approval or direction for emergency lending, such requirements are likely to be much less politicized than the US Treasury approval of loans to nonbanks; (5) it is the only country that places restrictions on banks using discount window loans to support affiliates; (6) it is the only country requiring that there be a broad program for borrowing by nonbanks; and (7) it is the most aggressive country in requiring disclosure, thereby possibly inhibiting borrowers from borrowing due to the associated stigma. All but the first point results from changes by Dodd–Frank. This US weakness is not likely to be rectified in the near future given the politics surrounding bailouts.
Alan N. Rechtschaffen
- Published in print:
- 2014
- Published Online:
- May 2014
- ISBN:
- 9780199971541
- eISBN:
- 9780199361458
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199971541.003.0001
- Subject:
- Law, Company and Commercial Law
This chapter examines the origins of the financial crisis and its impact on the regulatory environment. It explains how failures in individual markets and institutions rapidly devolved into global ...
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This chapter examines the origins of the financial crisis and its impact on the regulatory environment. It explains how failures in individual markets and institutions rapidly devolved into global financial recession, how financial markets and regulators responded to the crisis, and the effects of the crisis on financial institutions and financial instruments. It discusses the role of U.S. real estate markets in precipitating the crisis, the effects of mortgage lending on the broader capital markets and U.S. economy, the use of government-sponsored entities to refinance mortgages, and the initial reaction of the Federal Reserve to the liquidity crisis. It looks at the passage of several legislative acts to address the financial crisis, including the Emergency Economic Stabilization Act, American Recovery and Reinvestment Act, and Dodd-Frank Act. Finally, the chapter provides an overview of the European debt crisis and political conflicts that have accompanied efforts to address the U.S. public debt.Less
This chapter examines the origins of the financial crisis and its impact on the regulatory environment. It explains how failures in individual markets and institutions rapidly devolved into global financial recession, how financial markets and regulators responded to the crisis, and the effects of the crisis on financial institutions and financial instruments. It discusses the role of U.S. real estate markets in precipitating the crisis, the effects of mortgage lending on the broader capital markets and U.S. economy, the use of government-sponsored entities to refinance mortgages, and the initial reaction of the Federal Reserve to the liquidity crisis. It looks at the passage of several legislative acts to address the financial crisis, including the Emergency Economic Stabilization Act, American Recovery and Reinvestment Act, and Dodd-Frank Act. Finally, the chapter provides an overview of the European debt crisis and political conflicts that have accompanied efforts to address the U.S. public debt.
Alan N. Rechtschaffen
- Published in print:
- 2014
- Published Online:
- May 2014
- ISBN:
- 9780199971541
- eISBN:
- 9780199361458
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199971541.003.0012
- Subject:
- Law, Company and Commercial Law
Prior to the financial crisis, financial regulation was compartmentalized along lines of segmented financial instruments, but the crisis led to the revision of an outdated regulatory structure in ...
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Prior to the financial crisis, financial regulation was compartmentalized along lines of segmented financial instruments, but the crisis led to the revision of an outdated regulatory structure in particular as it relates to systemic risk. This chapter examines securities regulation in the United States. It looks at the coordination between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in regulating certain derivatives under the Dodd-Frank Act in particular as they relate to swaps. It also discusses the regulation of stocks, notes, investment contracts, and hedge funds. Finally, the chapter considers the consequences of securities violations.Less
Prior to the financial crisis, financial regulation was compartmentalized along lines of segmented financial instruments, but the crisis led to the revision of an outdated regulatory structure in particular as it relates to systemic risk. This chapter examines securities regulation in the United States. It looks at the coordination between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in regulating certain derivatives under the Dodd-Frank Act in particular as they relate to swaps. It also discusses the regulation of stocks, notes, investment contracts, and hedge funds. Finally, the chapter considers the consequences of securities violations.
Garcia Alcubilla and Ruiz del Pozo
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199608867
- eISBN:
- 9780191739125
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199608867.003.0004
- Subject:
- Economics and Finance, Financial Economics, Macro- and Monetary Economics
Agencies domiciled in non-EU countries do not need to be registered in order to issue ratings on EU issuers or on securities offered in the EU. However, these ratings may not be used for regulatory ...
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Agencies domiciled in non-EU countries do not need to be registered in order to issue ratings on EU issuers or on securities offered in the EU. However, these ratings may not be used for regulatory purposes by European financial institutions if they do not follow one of the two procedures set out in the Regulation: endorsement or certification based on equivalence (depending on the systemic importance of the foreign rating agency). This chapter explains the procedures and the requirements that non-EU agencies have to fulfil. In addition, it describes ESMA’s methodology to assess equivalence and its work in this area and on the signing of cooperation arrangements with non-EU authorities. Finally, a more detailed discussion on the US framework, including the SEC’s rules and the new provisions introduced by the Dodd–Frank Act, and an overview of the Japanese legislation on rating agencies are provided in the appendices.Less
Agencies domiciled in non-EU countries do not need to be registered in order to issue ratings on EU issuers or on securities offered in the EU. However, these ratings may not be used for regulatory purposes by European financial institutions if they do not follow one of the two procedures set out in the Regulation: endorsement or certification based on equivalence (depending on the systemic importance of the foreign rating agency). This chapter explains the procedures and the requirements that non-EU agencies have to fulfil. In addition, it describes ESMA’s methodology to assess equivalence and its work in this area and on the signing of cooperation arrangements with non-EU authorities. Finally, a more detailed discussion on the US framework, including the SEC’s rules and the new provisions introduced by the Dodd–Frank Act, and an overview of the Japanese legislation on rating agencies are provided in the appendices.
Abraham L. Newman and Elliot Posner
- Published in print:
- 2018
- Published Online:
- April 2018
- ISBN:
- 9780198818380
- eISBN:
- 9780191859526
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198818380.003.0006
- Subject:
- Political Science, Democratization
Chapter 6 examines the long-term effects of international soft law on policy in the United States since 2008. The extent and type of post-crisis US cooperation with foreign jurisdictions have varied ...
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Chapter 6 examines the long-term effects of international soft law on policy in the United States since 2008. The extent and type of post-crisis US cooperation with foreign jurisdictions have varied considerably with far-reaching ramifications for international financial markets. Focusing on the international interaction of reforms in banking and derivatives, the chapter uses the book’s approach to understand US regulation in the wake of the Great Recession. The authors attribute seemingly random variation in the US relationship to foreign regulation and markets to differences in pre-crisis international soft law. Here, the existence (or absence) of robust soft law and standard-creating institutions determines the resources available to policy entrepreneurs as well as their orientation and attitudes toward international cooperation. Soft law plays a central role in the evolution of US regulatory reform and its interface with the rest of the world.Less
Chapter 6 examines the long-term effects of international soft law on policy in the United States since 2008. The extent and type of post-crisis US cooperation with foreign jurisdictions have varied considerably with far-reaching ramifications for international financial markets. Focusing on the international interaction of reforms in banking and derivatives, the chapter uses the book’s approach to understand US regulation in the wake of the Great Recession. The authors attribute seemingly random variation in the US relationship to foreign regulation and markets to differences in pre-crisis international soft law. Here, the existence (or absence) of robust soft law and standard-creating institutions determines the resources available to policy entrepreneurs as well as their orientation and attitudes toward international cooperation. Soft law plays a central role in the evolution of US regulatory reform and its interface with the rest of the world.
Brian R. Cheffins
- Published in print:
- 2018
- Published Online:
- November 2018
- ISBN:
- 9780190640323
- eISBN:
- 9780190640354
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190640323.003.0007
- Subject:
- Law, Company and Commercial Law
The seventh and concluding chapter of The Public Company Transformed extrapolates from trends the previous chapters have identified to speculate on the future trajectory of the public company. ...
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The seventh and concluding chapter of The Public Company Transformed extrapolates from trends the previous chapters have identified to speculate on the future trajectory of the public company. Salient developments from the 2010s are taken into account, with particular emphasis being placed on those implying a path different from what would be anticipated given events occurring from the mid-twentieth century through to the opening decade of the twenty-first century. This chapter argues radical departures from present day arrangements are unlikely any time soon. For instance, recent predictions of the imminent demise of the public company appear to be wide of the mark. That means the transformation of the public company the book has described should end up being part of a larger story yet to be written rather than being a public company epitaph.Less
The seventh and concluding chapter of The Public Company Transformed extrapolates from trends the previous chapters have identified to speculate on the future trajectory of the public company. Salient developments from the 2010s are taken into account, with particular emphasis being placed on those implying a path different from what would be anticipated given events occurring from the mid-twentieth century through to the opening decade of the twenty-first century. This chapter argues radical departures from present day arrangements are unlikely any time soon. For instance, recent predictions of the imminent demise of the public company appear to be wide of the mark. That means the transformation of the public company the book has described should end up being part of a larger story yet to be written rather than being a public company epitaph.
Morgan Ricks
- Published in print:
- 2016
- Published Online:
- September 2016
- ISBN:
- 9780226330327
- eISBN:
- 9780226330464
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226330464.003.0011
- Subject:
- Law, Company and Commercial Law
Prior to the recent financial crisis, the U.S. monetary system was characterized by the absence of legal restrictions on the issuance of private money (cash equivalents), coupled with an implicit ...
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Prior to the recent financial crisis, the U.S. monetary system was characterized by the absence of legal restrictions on the issuance of private money (cash equivalents), coupled with an implicit commitment by the state to honor these instruments. This dubious structure remains basically unchanged. Rather than addressing the deep structural defects in the existing monetary framework, we have opted (through the Dodd-Frank Act and other reforms) for a staggeringly complex and hypertechnical regulatory overlay. This chapter provides an overview of the key components of these reforms, with a particular focus on so-called “macroprudential” or “systemic risk” regulation and on the development of special “resolution” tools for complex financial institutions. The chapter argues that these reforms’ prospects for success are doubtful: the system that has emerged is unworkable. The chapter suggests that a thoughtful revamp of the monetary framework could largely obviate the need for other forms of financial stability regulation. It concludes with some final thoughts on the legal engineering of monetary institutions.Less
Prior to the recent financial crisis, the U.S. monetary system was characterized by the absence of legal restrictions on the issuance of private money (cash equivalents), coupled with an implicit commitment by the state to honor these instruments. This dubious structure remains basically unchanged. Rather than addressing the deep structural defects in the existing monetary framework, we have opted (through the Dodd-Frank Act and other reforms) for a staggeringly complex and hypertechnical regulatory overlay. This chapter provides an overview of the key components of these reforms, with a particular focus on so-called “macroprudential” or “systemic risk” regulation and on the development of special “resolution” tools for complex financial institutions. The chapter argues that these reforms’ prospects for success are doubtful: the system that has emerged is unworkable. The chapter suggests that a thoughtful revamp of the monetary framework could largely obviate the need for other forms of financial stability regulation. It concludes with some final thoughts on the legal engineering of monetary institutions.
Daniel Carpenter
- Published in print:
- 2012
- Published Online:
- February 2015
- ISBN:
- 9780199845361
- eISBN:
- 9780190252625
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:osobl/9780199845361.003.0002
- Subject:
- Political Science, American Politics
This chapter discusses financial reform and regulation under the Obama administration. It details the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank Act), which ...
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This chapter discusses financial reform and regulation under the Obama administration. It details the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank Act), which initiated a major overhaul of American financial regulations and represented the Obama administration's main structural attack on the financial crisis of 2008 and the recession that followed. It argues that attempts to reshape the landscape in financial policy and regulation were only partially successful. Attempts to constrain leverage at top investment banks through stringent legislative standards were limited by a strong predilection to defer to existing regulators and international capital standards (the so-called Basel accords); stronger versions of derivative trading restrictions were abandoned for weaker, though still constraining, alternatives.Less
This chapter discusses financial reform and regulation under the Obama administration. It details the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank Act), which initiated a major overhaul of American financial regulations and represented the Obama administration's main structural attack on the financial crisis of 2008 and the recession that followed. It argues that attempts to reshape the landscape in financial policy and regulation were only partially successful. Attempts to constrain leverage at top investment banks through stringent legislative standards were limited by a strong predilection to defer to existing regulators and international capital standards (the so-called Basel accords); stronger versions of derivative trading restrictions were abandoned for weaker, though still constraining, alternatives.
Wulf A. Kaal and Dale A. Oesterle
- Published in print:
- 2017
- Published Online:
- August 2017
- ISBN:
- 9780190607371
- eISBN:
- 9780190607401
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190607371.003.0020
- Subject:
- Economics and Finance, Financial Economics
The hedge fund industry in the United States has evolved from a niche market participant in the early 1950s to a major industry operating in international financial markets today. Hedge funds in the ...
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The hedge fund industry in the United States has evolved from a niche market participant in the early 1950s to a major industry operating in international financial markets today. Hedge funds in the United States began as privately held and privately managed investment funds, unregistered and exempt from federal securities regulation. An increasing investor demand for hedge funds and substantial growth of the hedge fund industry resulted in a tectonic shift in the regulatory framework applicable to the industry via the Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act. This chapter summarizes the evolution of the regulatory framework governing the hedge fund industry. It focuses on the registration and disclosure provisions added by the Dodd-Frank Act and several other regulatory innovations, including the Jumpstart Our Business Startups (JOBS) Act and proposals for tax reform of the private investment fund industry.Less
The hedge fund industry in the United States has evolved from a niche market participant in the early 1950s to a major industry operating in international financial markets today. Hedge funds in the United States began as privately held and privately managed investment funds, unregistered and exempt from federal securities regulation. An increasing investor demand for hedge funds and substantial growth of the hedge fund industry resulted in a tectonic shift in the regulatory framework applicable to the industry via the Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act. This chapter summarizes the evolution of the regulatory framework governing the hedge fund industry. It focuses on the registration and disclosure provisions added by the Dodd-Frank Act and several other regulatory innovations, including the Jumpstart Our Business Startups (JOBS) Act and proposals for tax reform of the private investment fund industry.
Hal S. Scott
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780262034371
- eISBN:
- 9780262332156
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034371.001.0001
- Subject:
- Economics and Finance, Economic History
The Dodd–Frank Act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. Dodd–Frank is largely premised on the diagnosis ...
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The Dodd–Frank Act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. Dodd–Frank is largely premised on the diagnosis that connectedness was the major problem in that crisis—that is, that financial institutions were overexposed to one another, resulting in a possible chain reaction of failures. This book argues that it is not connectedness but contagion that is the most significant element of systemic risk facing the financial system. Contagion is an indiscriminate run by short-term creditors of financial institutions that can render otherwise solvent institutions insolvent. It poses a serious risk because, as the book explains, our financial system still depends on approximately $7.4 to $8.2 trillion of runnable and uninsured short-term liabilities, 60 percent of which are held by nonbanks. The book argues that efforts by the Federal Reserve, the FDIC, and the Treasury to stop the contagion that exploded after the bankruptcy of Lehman Brothers lessened the economic damage. And yet Congress, spurred by the public's aversion to bailouts, has dramatically weakened the power of the government to respond to contagion, including limitations on the Federal Reserve's powers as a lender of last resort. Offering uniquely detailed forensic analyses of the Lehman Brothers and AIG failures, and suggesting alternative regulatory approaches, the book makes the case that we need to restore and strengthen our weapons for fighting contagion.Less
The Dodd–Frank Act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. Dodd–Frank is largely premised on the diagnosis that connectedness was the major problem in that crisis—that is, that financial institutions were overexposed to one another, resulting in a possible chain reaction of failures. This book argues that it is not connectedness but contagion that is the most significant element of systemic risk facing the financial system. Contagion is an indiscriminate run by short-term creditors of financial institutions that can render otherwise solvent institutions insolvent. It poses a serious risk because, as the book explains, our financial system still depends on approximately $7.4 to $8.2 trillion of runnable and uninsured short-term liabilities, 60 percent of which are held by nonbanks. The book argues that efforts by the Federal Reserve, the FDIC, and the Treasury to stop the contagion that exploded after the bankruptcy of Lehman Brothers lessened the economic damage. And yet Congress, spurred by the public's aversion to bailouts, has dramatically weakened the power of the government to respond to contagion, including limitations on the Federal Reserve's powers as a lender of last resort. Offering uniquely detailed forensic analyses of the Lehman Brothers and AIG failures, and suggesting alternative regulatory approaches, the book makes the case that we need to restore and strengthen our weapons for fighting contagion.
