December 2013

Sofya Manukyan has published “Can the ICESCR Be an Alternative for Environmental Protection? Analysis of the Effectiveness of the ICESCR in Holding State and Non-State Actors Accountable for Environmental Degradation” on SSRN.  Here is an excerpt of the abstract:

[O]ne method for tackling the problem of environmental degradation is creating universal mandatory norms to which all corporations would adhere. Another method, however, which is considered in this work in more details, is the approach to the issue of environmental degradation from the human rights perspective, particularly from the perspective of each human being having the right to live in a healthy, clean environment. As the reflection of this right is found in the state binding UN Covenant on Economic, Social and Cultural Rights (ICESCR), we consider this indirect approach to the environmental protection as a possible effective method for addressing the issues of environmental degradation.

Therefore, in this work we first justify our choice of approaching the environmental protection from the perspective of state’s human rights obligations, rather than from the perspective of voluntary guidelines adopted by corporations and financial institutions. We then analyze how relevant articles of the ICESCR address the issue of environmental degradation. After…

Laura Brandstetter & Martin Jacob have posted “Do Corporate Tax Cuts Increase Investments?” on SSRN.  Here is the abstract:

This paper studies the effect of corporate taxes on investment. Using firm-level data on German corporations, we investigate the 2008 tax reform that cut corporate taxes by 10 percentage points. We expect heterogeneous investment responses across firms, since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms. Using a matching difference-in-differences approach, we show that, following the corporate tax cut, domestically owned firms increased investments to a larger extent than foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but have heterogeneous investment responses across firms.

Andrew F. Tuch has posted, “Financial Conglomerates and Chinese Walls,” on SSRN.  Here is the abstract:

The organizational structure of financial conglomerates gives rise to fundamental regulatory challenges. Legally, the structure subjects firms to multiple, incompatible client duties. Practically, the structure provides firms with a huge reservoir of non-public information that they may use to further their self-interests, potentially harming clients and third parties. The primary regulatory response to these challenges and a core feature of the financial regulatory architecture is the Chinese wall or information barrier. Rather than examine measures to strengthen Chinese walls, to date legal scholars have focused on the circumstances in which to deny them legal effect, while economists have focused on demonstrating Chinese walls’ practical ineffectiveness in a range of important contexts.

This paper discusses the phenomenon of failing Chinese walls, explains why it occurs, and proposes a regulatory solution. The paper argues that limits on market discipline and evidential difficulties in detecting and proving the use of non-public information account for the failures of Chinese walls. It shows how the Volcker Rule, a core plank of the Dodd-Frank Act, will likely reduce harms flowing from failing Chinese walls, despite the rule’s…

On December 5th and 6th I attended and presented at the third annual Sustainable Companies Project Conference at the University of Oslo.  The project, led by Beate Sjafjell began in 2010 and attempts to seek concrete solutions to the following problem:

Taking companies’ substantial contributions to climate change as a given fact, companies have to be addressed more effectively when designing strategies to mitigate climate change. A fundamental assumption is that traditional external regulation of companies, e.g. through environmental law, is not sufficient. Our hypothesis is that environmental sustainability in the operation of companies cannot be effectively achieved unless the objective is properly integrated into company law and thereby into the internal workings of the company.  

Members of the Norwegian government, the European Commission, the Organisation for Economic Cooperation and Development (“OECD”), and the United Nations Environmental Programme  (UNEP) Finance Initiative also presented with academics and practitioners from the US, Europe, Asia and Africa.

I did not participate in the first two conferences, but was privileged this year to present my paper entitled “Climate Change and Company Law in the United States: Using Procurement, Pay and Policy Changes to Influence Corporate Behavior.” The program and videos of…

For those of you who haven’t seen it, the SEC has issued its rules proposal for so-called Regulation A+. It’s available here.

Section 401 of the JOBS Act required the SEC to exempt from registration public offerings of securities with an aggregate offering amount of up to $50 million per 12-month period. The Act does not go into much detail, but it does impose some conditions on the exemption the SEC is supposed to adopt:

  • the securities may be offered and sold publicly
  • the securities are not “restricted securities,” meaning they may be resold freely
  • the issuer must file an offering statement with the SEC and distribute that offering statement to prospective investors
  • the issuer may solicit interest in the offering prior to filing an offering statement with the SEC
  • the issuer must file audited financial statements annually
  • certain issuers are disqualified
  • the SEC may require the issuer to file periodic disclosures.

Section 401 does not mention Regulation A, but the statutory requirements are similar to the requirements in Regulation A, so everyone has been referring to it as Regulation A+. The SEC could have chosen to issue a new exemption completely separate from Regulation A, but it has…

In 13 Things We Learned about Money in Politics in 2013, written by Stetson Professor Ciara Torres-Spelliscy, numbers 9 and 10 highlight the intersection of corporate and campaign finance laws.

10. Disappointing nearly 700,000 members of the public who had asked for more transparency from public companies, the Securities and Exchange Commission (SEC) refused to require transparency for corporate political spending — for now.

9. Shareholder suits over corporate political spending bookended the year. In January, the Comptroller of New York sued Qualcomm, as a shareholder under Delaware law, to get their books and records of political spending. In December, the insurance giant Aetna was suedby a shareholder represented by Citizens for Responsibility and Ethics in Washington (CREW) for hiding its political spending.

To access the rest of the list and other campaign finance information provided by the Brennan Center for Justice, click here.

-Anne Tucker

The main question is whether or not the Fed will begin tappering its current bond buying policy which has been in place since 2008.  NPR did a quick and accessible print and radio story on the Fed and the issue of tappering.  Both versions of the story are available here.  I’ve also posted on this blog before on the issues facing the Fed as leadership is about to change hands.

Watch it live at 2:30 pm today here.  

[editted today at 3:15]– Summary of Fed Policy Announcements:

  • Fed will reduce (tapper) its bond buying program from $85 billion to $75 billion per month, with additional tapering expected as the economy continues to strengthen.
  • The policy at the Fed is dependent, in part, upon the rate of inflation, which has been running below the 2% benchmark.  “The [Fed] recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward it objective over the medium term.”
  • Short-term interest rates are expected to hold steady through 2014 with some anticipated increase in 2015, especially if the unemployment rate falls

…

As someone who has focused his research, scholarship, and teaching on business law and energy law, it’s long been my argument that energy is the key to long-term prosperity and quality of life.  Access to energy is critical, as are sustainable practices to ensure access to energy goes along with, and is not in lieu of, access to clean air and clean water.  See, e.g., my article: North Dakota Expertise: A Chance to Lead in Economically and Environmentally Sustainable Hydraulic Fracturing.

As I often do, this morning I visited the Harvard Business Law Review Online to see what topical issues were taking center stage.  A quick look reveals that three of the eight articles under the U.S. Business Law heading were energy related.  The articles are worth a look.  Here’s a quick link to each:

The Regulatory Challenge Of Distributed Generation, by David B. Raskin

Investing in U.S. Pipeline Infrastructure: Could the Proposed Master Limited Partnerships Parity Act Spur New Investment?, by Linda E. Carlisle, Daniel A. Hagan & Jane E. Rueger

Why Are Foreign Investments in Domestic Energy Projects Now Under CFIUS Scrutiny?, by Stephen Heifetz & Michael Gershberg

As my friend and colleague Marie…

I have been pondering one of the provisions in the SEC’s proposed crowdfunding rules, and I have decided that it’s extremely dangerous to crowdfunding intermediaries.

Reducing the Risk of Fraud: The Statutory Requirement

Section 4A(a)(5) of the Securities Act, added by the JOBS Act, requires crowdfunding intermediaries (brokers and funding portals) to take steps to reduce the risk of fraud with respect to crowdfunding transactions. The SEC is given rulemaking authority to specify the required steps, although the statute specifically requires “a background and securities enforcement regulatory history check” on crowdfunding issuer’s officers and directors and shareholders holding more than 20% of the issuer’s outstanding equity.

Proposed Rule 301

Proposed Rule 301 of the crowdfunding regulation implements this requirement.

A couple of the requirements of Rule 301 don’t really relate to fraud, even though the section is captioned “Measures to reduce risk of fraud.” Rule 301(a) requires the intermediary to have a reasonable basis for believing that the issuer is in compliance with the statutory requirements and the related rules. Rule 301(b) requires the intermediary to have a reasonable basis for believing that the issuer has means to keep accurate records of the holders of the securities it’s selling.

Over at The Race to the Bottom, Jay Brown has compiled a series of post on the recent proxy advisory services roundtable.  Here are the relevant links:

  • Introduction (“To be frank … roundtables do not often move the issue forward.  Comments can be random or incomplete. In a room full of experts, they can be woefully unprepared and tendentious. Statements can be predictable and provide little additional value to the debate.  This Roundtable, however, was different. It was very well done.”).
  • The Participants (“There was a good cross section of views to say the least.”).
  • The Data (“[T]he evidence presented at the Roundtable indicated that the largest asset managers (BlackRock for example) viewed the recommendations as an input, not a controlling influence.”).
  • Voting Decisions and the Need for Data Tagging (“Mutual funds must file voting data on Form N-PX…. [we should] require the filing of the data in an interactive format.”).
  • The Issue of Concentration (“Concentration is … a structural issue that exists in many places in the securities markets and the proxy process.”).
  • Plumbing Problems (“Michelle Edkins from BlackRock … noted that BlackRock retained ISS not only for advice but for other services as well. Some

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