December 2018

I am finishing up the last of my grading (grades are due on Wednesday).  Nevertheless (or maybe for the purpose of grading avoidance), I have been determined all day to take a pause to reflect on 2018 and look forward to 2019.  For me (and perhaps for us all), 2018 was a year with both joys and sorrows; achievements and failures; ups and downs.  I admit that 2018’s sorrows were more abundant than usual–or than I would have liked.  And so, I am primed to kick 2018 to the curb.  Ready or not, 2019 will be here in a few short hours.  I have much to look forward to in the coming year–a research leave, my son’s wedding, and lots more that I know I am forgetting or do not even know about yet!

Among my more serious reflections and (dare I say it) resolutions heading into 2019 is self-care.  I am particularly mindful of the need for lawyers and lawyers-in-waiting (our students) to be aware of an attendant to their mental health.  A few days ago, The American Lawyer published an article entitled After a Year Marked by Tragedy, Attorney Mental Health Takes the Spotlight.  The article highlights…

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Chief Justice Leo Strine of the Delaware Supreme Court just posted a fascinating article/speech to SSRN, which was apparently delivered to the Institute for Corporate Governance & Finance in November.

The subject of the speech is the fiduciary obligation that mutual funds owe fund beneficiaries when voting their shares, and in particular, the funds’ failure – in Strine’s view – to adequately police portfolio companies’ political spending.

The general thesis is that investors in mutual funds benefit most when the economy does well by generating long-term, sustainable jobs, and he lauds the current trend of mutual funds’ willingness to second-guess corporate managers and vote for measures that promote long-term sustainability, including their increasing willingness to back shareholder-sponsored proposals on ESG measures.  As he puts it:

[I]nstitutional investors are not just getting involved in boardroom battles.  … [S]ome prominent mutual funds have now expressed the view that their portfolio companies should act with sufficient regard for the law and general social responsibility. That is, in the area of corporate social responsibility, the largest institutional investors seem to be evolving in a positive direction.

He laments, however, that funds’ willingness to buck management appears to stop when it comes to political…

We now have some new developments on the non-attorney representative front.  After taking time to consider responses to its prior request for comments, FINRA’s board has approved a new rule proposal to prohibit “compensated non-attorney representatives from practicing in the FINRA arbitration and mediation forum.”  Once filed with the SEC, the proposed rule should be available here.

Merry Christmas to you and yours, if you’re celebrating. And if you’re not, love to you, anyway. 

A few reminders on Christmas:  LLCs are corporations. And the business judgment rule gives directors a lot of latitude. Or at least it should. Even if Delaware courts say dumb stuff from time to time. 

Love to all. 

A few weeks ago, I posted on the SEC Roundtable on the Proxy Process (here).  I noted in a postscript to that post that friend-of-the-BLPB Bernie Sharfman had an additional comment letter (his fourth) relating to this regulatory project up his sleeve (so to speak).  That comment letter, dated December 17, 2018, was recently filed (see here) and focuses on voting recommendations.  The nub?

Investment advisers should not be in fear of breaching their fiduciary duties if they use board voting recommendations. . . . The SEC needs to go further than just approving the use of board voting recommendations as long as the investment adviser has an agreement with the client to use them. . . . [T]he SEC needs to explicitly state in some way that an investment adviser will not be in breach of its fiduciary duties under the Advisers Act if it uses board voting recommendations when voting its proxies.

To implement such a policy, this comment letter requests the SEC to provide investment advisers with a liability safe harbor under the Advisers Act when using board voting recommendations in voting their proxies as long as their clients do not prohibit their use…

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Earlier this week, the Bank for International Settlements – an international financial institution in Basel, Switzerland, created in 1930 and owned by 60 global central banks – released its Quarterly Review of international banking and financial market developments.  Several “special features” (articles) follow a sobering discussion of conditions in today’s global financial markets aptly titled: “Yet more bumps on the path to normal.”  In this post, I focus on the article, The growing footprint of EME banks in the international banking system (Growing Footprint), and comment upon its links to another, The geography of dollar funding of non-US banks (Dollar Funding) (note my admirable restraint in choosing not to discuss Clearing risks in OTC derivatives markets: the CCP-bank nexus).

Emerging market economy (EME) banks are much more on the move these days than advanced economy (AE) banks when it comes to growth in cross-border lending activity.  Indeed, the expanding footprint in the global banking system of banks headquartered in EMEs mirrors the increased contribution of EMEs to global GDP (now at 40%) and its growth (responsible for 2/3 in 2017).  Key takeaways from Growing Footprint are: 1) a greater amount of EME banks’ cross-border lending to EMEs transpires…

If you are looking for podcasts over the break, I recommend Professor Brian Frye’s Ipse Dixit. I have only listened to a handful of the 75 episodes, but I learned something new in each one.

A big thanks to Brian for putting all of these podcasts on legal scholarship together. The podcasts cover a wide range of legal topics, mostly in an interview format with other professors.