June 2022

Today’s press release from Prof. Lawrence Cunningham states in part:

Twenty-two of the nation’s leading professors of law and finance today wrote the Securities and Exchange Commission (SEC) to renew their doubts about the agency’s authority to adopt a new far-reaching climate disclosure regime and to urge an immediate withdrawal of the proposal. Initially writing in response to the SEC’s proposed rule requiring U.S. public companies to create and disclose extensive information on greenhouse gas emissions, the professors submitted a public letter in April questioning the authority of a federal financial regulator to collect climate-related information and identifying numerous reasons the proposal may face a challenge in federal courts. Since then, the debate has been joined by a number of other professors who have submitted letters supporting the SEC’s authority. In the letter filed today, the professors weigh these arguments and explain their contrary conclusion.

The full comment letter can be found here. A relevant excerpt:

[T]he clear purpose (and certain effect) of these disclosures is to give third parties information for use in their campaigns to reduce corporate emissions, regardless of the effect on investors…. Imposing substantial costs on some companies to prepare for a “potential transition to a lower

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On the June 16, 2022, episode of the Capital Record podcast, David Bahnsen and Oren Cass have a lively and stimulating conversation about the social utility of private equity. You can find the episode here. Below is a brief description.

David is joined once again by Oren Cass of American Compass, this time to discuss the state of American financial markets. The two have a congenial conversation about private equity and venture capital, what is going wrong with the two, and what the solutions may be. There is more disagreement than agreement, but there is a mutual and sincere effort to identify issues and present thoughtful remedies. Whatever your view may be on what is right or wrong in the evolution of financial markets, you’ll find this robust discussion thoughtful, provocative, and engaging.

In December 2018, in one of my earliest posts on the BLPB, I shared “although esoteric, such issues as who has access to an account at the Fed are critical social policy choices with real world implications that merit broad-based public debate.”  And I’ve continued to highlight this issue with posts such as “Master Accounts at the Fed: An Arcane But Highly Important Issue” and “Professor Hill on Bank Access to Federal Reserve Accounts and Payment Systems.”  And I’m going to continue to do so today and in the future.  It’s just that important. 

So today, I want to highlight that Custodia Bank, Inc. recently filed a lawsuit against the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City.  Custodia alleges that the defendants have unlawfully delayed – for more than 19 months now – processing its application for a Fed master account.  A few related news stories are: here, here, and here.  Recall that TNB USA Inc. sued the Federal Reserve Bank of New York for related reasons (here), but this lawsuit was dismissed.  I’ll be sure to keep BLPB readers posted regarding what

In a post last month, I mentioned my recently published article on teaching change leadership in law schools.  That article, Change Leadership and the Law School Curriculum, 62 Santa Clara L. Rev. 43 (2022), offers some ideas about preparing our students for leading change.  The SSRN abstract follows.

Lawyers, as inherent and frequent leaders in professional, community, and personal environments, have a greater-than-average need for proficiency in change leadership. In these many settings, lawyers are charged with promoting, making, and addressing change. For example, one commentator observes that, “as stewards of the family justice system and leaders of change, family law attorneys have an ongoing responsibility to foster continuous system improvement.” Change is part of the fabric of lawyering, writ large. Change leadership, whether voluntarily assumed or involuntarily shouldered, is inherent in the lawyering task. Yet, change leadership—well known as a focus for attention in management settings and related academic literature—is rarely called out for individual or focused attention in the traditional law school curriculum. This article presents a brief argument for the intentional and instrumental teaching of change leadership to law students.

Many of our students already have been in or are assuming leadership roles.  Others…

The battle for Spirit Airlines is fascinating.  Frontier offered to buy Spirit at a price of roughly $22 per share, payable mostly in Frontier stock.  Then JetBlue swooped in with a topping bid of $33 per share in cash.  Spirit’s board maintained its preference for Frontier’s bid, and Glass-Lewis recommended in favor of Frontier, but ISS recommended against.  ISS’s argument was, in part, that if shareholders liked the sector, they could take JetBlue’s cash and reinvest it.

Spirit’s argument was that the combination with Frontier not only stood a greater chance of surviving antitrust review, but there would be substantial operating synergies such that the combined entity would be expected to outperform the sector in the long term.

There was some interesting jousting over the reverse break fees if DoJ refused either combination – including Jet Blue’s highly unusual offer to pay part of the break fee in cash as a special dividend to Spirit shareholders as soon as they voted for a deal between Spirit and JetBlue (I mean, it’s kind of complicated given the numbers floating around, JetBlue offered $33, then lowered it to $30 when it made a tender offer for Spirit, and…

There have been number of recent BLPB posts representing a diversity of viewpoints concerning the SEC’s proposed rule to “Enhance and Standardize Climate-Related Disclosures for Investors”. For example, co-blogger Joan MacLeod Heminway recently posted on a comment letter drafted by  Jill E. FIsch, George S. Georgiev, Donna Nagy, and Cynthia A. WIlliams (and signed by Joan and 24 others) that affirms the proposed rule is within the SEC’s rulemaking authority. I have offered a couple posts raising concerns about the proposed rule from the standpoint of utility and legal authority (see here and here). One of the concerns I have raised is that the SEC’s proposed disclosure regime may compel corporate speech in a manner that runs afoul of the First Amendment. SEC Commissioner Hester Pierce raised this same concern, and now Professor Sean J. Griffith has posted a new article, “What’s ‘Controversial’ About ESG? A Theory of Compelled Commercial Speech under the First Amendment”, which offers a more comprehensive treatment of this problem. Professor Griffith has also submitted a comment letter to the SEC raising this issue. Here’s the abstract for Professor Griffith’s article:

This Article uses the SEC’s recent foray into ESG…

Prior to joining academia, I served as a compliance officer for a Fortune 500 company and I continue to consult on compliance matters today. It’s an ever changing field, which is why I’m glad so many students take my Compliance, Corporate Governance, and Sustainability course in the Fall. I tell them that if they do transactional or commercial litigation work, compliance issues will inevitably arise. Here are some examples: 

  • In M&A deals, someone must look at the target’s  bribery, money laundering, privacy, employment law, environmental, and other risks
  • Companies have to complete several disclosures. How do you navigate the rules that conflict or overlap?
  • What do institutional investors really care about? What’s material when it relates to ESG issues?
  • What training does the board need to ensure that they meet their fiduciary duties?
  • How do you deal with cyberattacks and what are the legal and ethical issues related to paying ransomware?
  • How do geopolitical factors affect the compliance program?
  • Who can be liable for a compliance failure?
  • What happens when people cut corners in a supply chain and how can that affect the company’s legal risk?
  • What does a Biden DOJ/SEC mean compared to the same offices under Trump?
  • Who

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Elisabeth Haub School of Law at Pace University invites applications for a Visiting Professor for Spring 2023 

The Elisabeth Haub School of Law at Pace University is currently seeking applicants for a Visiting Professor to teach during the Spring 2023 semester. We are particularly interested in applicants who can teach Constitutional Law, Corporations and other courses in the business law area.

All applicants should have excellent academic credentials as well as demonstrated skill and experience in teaching.  The position is a temporary, non-tenure-track appointment.

Applicants should be willing and available to teach using in-person or hybrid formats, depending on changing circumstances and the needs of the particular classes.

Applications are encouraged from people of color, individuals of varied sexual and affectional orientations, individuals who are differently-abled, veterans of the armed forces or national service, and anyone whose background and experience will contribute to the diversity of the law school.  Pace University is committed to achieving completely equal opportunity in all aspects of University life.

Please apply via https://careers.pace.edu/postings/22602. Applications will be considered on a rolling basis.

Pace University’s Elisabeth Haub School of Law offers J.D. degrees, Masters of Law degrees in both Environmental and International Law, and a series of…

This post alerts everyone to a comment letter, drafted by Jill Fisch, George Georgiev, Donna Nagy, and Cindy Williams (signed by the four of them and 26 other securities law scholars, including yours truly and Ann Lipton), affirming that the Securities and Exchange Commission’s recent proposal related to the enhancement and standardization of climate-related disclosures for investors is within its rulemaking authority.  The letter was filed with the Commission yesterday and has been posted to SSRN.  The SSRN abstract is included below.

This Comment Letter, signed by 30 securities law scholars, responds to the SEC’s request for comment on its March 2022 proposed rules for the “Enhancement and Standardization of Climate-Related Disclosures for Investors” (the “Proposal”). The letter focuses on a single question—whether the Proposal is within the SEC’s rulemaking authority—and answers this question in the affirmative.

The SEC’s authority for the Proposal is grounded in the text, legislative history, and judicial interpretation of the federal securities laws. The letter explains the objectives of federal regulation and demonstrates that the Proposal’s requirements are properly understood as core capital markets disclosure in the service of those objectives. The statutory framework requires the SEC to adjust and update the content of the…

I am excited to be promoting here an inventive and interesting paper, Total Return Meltdown: The Case for Treating Total Return Swaps as Disguised Secured Transactions, written by friend-of-the-BLPB Colin Marks (St. Mary’s School of Law).   The SSRN abstract follows.

Archegos Capital Management, at its height, had $20 billion in assets. But in the spring of 2021, in part through its use of total return swaps, Archegos sparked a $30 billion dollar sell-off that left many of the world’s largest banks footing the bill. Mitsubishi UFJ Group estimated a loss of $300 million; UBS, Switzerland’s biggest bank, lost $861 million; Morgan Stanley lost $911 million; Japan’s Nomura, lost $2.85 billion; but the biggest hit came to Credit Suisse Group AG which lost $5.5 billion. Archegos, itself lost $20 billion over two days. These losses were made possible due to the unique characteristics of total return swaps and Archegos’ formation as a family office, both of which permitted Archegos to skirt trading regulations and reporting requirements. Archegos essentially purchased beneficial ownership in large amounts of stocks, particularly ViacomCBS Inc. and Discovery Inc., on credit. Under Regulation T of the Federal Reserve Board, up to 50 percent of the purchase price…