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Colleen Baker

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PhD (Wharton) Professor Baker is an expert in banking and financial institutions law and regulation, with extensive knowledge of over-the-counter derivatives, clearing, the Dodd-Frank Act, and bankruptcy, in addition to being a mediator and arbitrator.

Previously, she spent time at the U. of Illinois Urbana-Champaign College of Business, the U. of Notre Dame Law School, and Villanova University Law School. She has consulted for the Federal Reserve Bank of Chicago, and for The Volcker Alliance.  Prior to academia, Professor Baker worked as a legal professional and as an information technology associate. She is a member of the State Bars of NY and TX. Read More

The states and XY Planning have failed in their bid to stop Regulation Best Interest.  The Second Circuit found that the SEC had discretionary authority to enact a regulation short of a uniform fiduciary standard.  It also found that the states lacked standing to sue because their theory that their tax revenue would decline was “speculative.”

With Reg BI going into effect, states must decide whether to simply pass their own statutes and rules.  As it stands, Nevada remains the nation’s only state to have a state fiduciary statute.  Other states, notably New Jersey and Massachusetts have pursued administrative rule making approaches. The next fight will likely be about the scope of state authority to regulate securities sales practices.  

Industry lawyers will likely do all they can to forestall the promulgation of state regulation or, if that fails, seek to have it struck down as somehow preempted by federal law. Some academic work has begun to explore this issue.  Columbia Law’s Yerv Melkonyan has a forthcoming Note exploring the topic (it was also featured on Andrew Jennings’s podcast here).  In a symposium piece, I took a close look at one preemption argument industry representatives made in comment letters…

Yesterday, the Bank for International Settlements (BIS), whose ownership consists of 62 central banks, released its Annual Economic Report (here).  It’s a treasure trove of information for banking and financial market regulation types (like me!) and includes a plethora of informative data and graphs.  It’s divided into three main parts: 1) A global sudden stop, 2) A monetary lifeline: central banks’ crisis response, and  3) Central banks and payments in the digital era.  Definitely well worth reading!

BLPB Readers,

The Emory Corporate Governance and Accountability Review (ECGAR) is currently accepting submissions to be considered for publication in our next volume (8). Submissions are accepted and reviewed on a rolling basis until the end of September. ECGAR is a publication that welcomes articles and submissions that touch on corporate governance.

The full details of this call for submissions can be found here:  Download ECGAR Call for Submissions .

On p. 17 of Rules for Principles and Principles for Rules: Tools for Crafting Sound Financial Regulation (here), Heath P. Tarbert, the Chairman and Chief Executive of the Commodity Futures Trading Commission, provides a useful table that he notes “is intended to be a helpful reference point for regulators confronted with finding the appropriate balance between principles and rules.”  I found myself thinking of how helpful a table like this – and the article in general – would have been when I was teaching courses focused on the regulation of financial markets! 

I highly recommend this very readable work to BLPB readers, especially to those teaching in the area of regulation.  In fact, I’d likely make this article assigned reading if I were teaching a course on financial regulation this fall.  It does an excellent job of providing an overview of the strengths and weaknesses of principles-based versus rules-based approaches to regulation and discussing hybrid possibilities.  It also examines four categories of factors that suggest taking one approach over the other (summarized in the p.17 table), and applies these factors to several areas (automated trading, position limits, cross-border regulations, and digital assets).             

The New Public Interest in Private Markets: Transactional Innovation for Promoting Inclusion

January 5-9, 2021, AALS Annual Meeting

The AALS Section on Transactional Law and Skills is pleased to announce a program titled The New Public Interest in Private Markets: Transactional Innovation for Promoting Inclusion during the 2021 AALS Annual Meeting in San Francisco, California. This session will explore how recent developments in corporate and transactional practice address issues of bias in corporate governance and the workplace, with examples ranging from Weinstein representations & warranties in M&A agreements to California’s Women on Boards statute to inclusion riders in the entertainment industry. These developments raise immediate questions of whether public policy goals of achieving greater inclusivity are being met, and they also shed light on perennial debates about the role public law and private ordering play in spurring social innovation.

In addition to paper presentations, the program will feature a panel focusing on how to incorporate concepts, issues, and discussions of equity and inclusivity across the transactional
curriculum, including in clinics and other experiential courses, as well as in doctrinal courses.

FORMAT: Scholars whose papers are selected will provide a presentation of their paper, followed by commentary and audience Q&A.

SUBMISSION…

Thanks to Andrew Jennings, a draft comment letter on the draft model whistleblower statute is now open for signatures and comments.   If you’re interested in joining, you can access the comment letter here.  I’ve signed on.  If you have other thoughts that the drafters should consider, the deadline for comments is June 30th.  Hopefully, the NASAA draft will incorporate the insights we gained from watching the federal whistleblower bounty program begin its operations.

In doing a routine SSRN search, I’m always thrilled to see an exciting new banking article!  At the top of my “to read list” for this week is Michael Salib & Christina Parajon Skinner’s, Executive Override of Central Banks: A Comparison of the Legal Frameworks in the United States and the United Kingdom (here).  For a quick read, the authors have a post on the CLS Blue Sky Blog (here).  The article’s abstract is here:

This Article examines executive branch powers to “override” the decisions of an independent central bank. It focuses in particular on the power and authority of a nation’s executive branch to direct its central bank, thereby circumscribing canonical central bank independence. To investigate this issue, this Article compares two types of executive over- rides: those found in the United States, exercised by the U.S. Treasury (Treasury) over the U.S. Federal Reserve (the Fed), and those in the United Kingdom, exercised by Her Majesty’s Treasury (HM Treasury) over the Bank of England (the Bank). This Article finds that in the former, the power is informal and subject to minimal formal oversight, whereas in the latter, there are legal powers of executive override within…

Alex Platt has a fascinating new paper arguing that the SEC should consider the potential private litigation consequences of their activities.  He starts with the observation that SEC enforcement and oversight activity undoubtedly influences the private securities class actions often following in the SEC’s wake. SEC enforcement can catalyze or inhibit these “piggybacked” private securities class actions in many different ways.  For example, the SEC’s enforcement division may catalyze private litigation by revealing facts either through the filing of a complaint or in a settlement agreement. An SEC decision to include an admission of wrongdoing in a settlement agreement would substantially advance private litigation. This process can allow private attorneys to discover, and later plead, facts critical to surviving a motion to dismiss.  The SEC’s Division of Corporation Finance now also catalyzes and inhibits private litigation through its comment letter process.  Consider how the SEC communicates its views to issuers.  Oral comments in a phone call leave no record for plaintiffs to cite in some later class action.  In contrast, a disclosed letter laying out the SEC’s reasoning may persuade a court that particular facts were material or that a defendant had scienter.  A decision to pick up the phone…

This past week, I had occasion to return to the Financial Stability Board’s (FSB) recent Consultative document, Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution (Guidance), which I wrote a brief post about several weeks ago (here).  In doing so, I spent more time thinking about the possibility of clearinghouse shareholders raising “no creditor worse off than in liquidation” (NCWOL) claims in a resolution scenario.  I’m struggling with this idea.  Shareholders are not creditors.  I’ve decided to research this issue more and plan to write a short article.  Stay tuned.

The Guidance notes the principle:

that in resolution CCP [clearinghouse] equity should absorb losses first, that CCP equity should be fully loss-absorbing, and that resolution authorities should have powers to write down (fully or partially) CCP equity. 

It also notes that:

actions in resolution that expose CCP equity to larger default or non-default losses than in liquidation under the applicable insolvency regime could, based on the relevant counterfactual, enable equity holders to raise NCWOL claims.  This may be inconsistent with the other Key Attributes principle that equity should be fully loss absorbing in resolution.  This may also raise moral…

The World Bank and IMF recently released a joint note, COVID-19: The Regulatory and Supervisory Implications for the Banking Sector (here).  It’s a great resource for those focused on banking, offering “a set of high-level recommendations that can guide national regulatory and supervisory responses to the COVID-19 pandemic” and “an overview of measures taken across jurisdictions to date.”  Annex 1: Overview of Statements and Guidance Provided by Standard-Setting Bodies in Response to the COVID-19 Pandemic is a particularly helpful reference.  

Yesterday’s post by Ann Lipton about DoorDash and pizza arbitrage reminded me that food is a really fun, relatable topic for legal/classroom discussion, especially in a transactional or entrepreneurial law course.  In the current issue of Food & Wine, I enjoyed “From the Lawyer’s Desk,” a short blurb attached to the article, Positive Partnerships One reason why chefs are partnering with hotels to open restaurants? Risk reduction, in which hospitality lawyer, Jasmine Moy, discussed common chef-hotel partnership deals.  Unfortunately, I couldn’t find a link to this for readers, but I did see other legally oriented possibilities (for example, Don’t Open a Restaurant Until You Read This).   

Breath.  Both Joan Heminway and I have…