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 The Society of Corporate Compliance and Ethics is hosting a virtual ESG and Compliance Conference on November 7.  I love to hear academics talk about these issues at conferences but because I still engage in the practice of law and I teach about compliance, governance, and sustainability, I find the conversations are very different when listening to practitioners.

My panel is titled ESG Due Diligence Across the Corporate Lifecycle From Start-Up to Maturity: The Roles of Compliance, Ethics, Legal, and the Board. My co-panelists, Ahpaly Coradin, Partner, Pierson Ferdinand, and Eugenia di Marco, a startup founder and international legal advisor, and I will focus on:

  •  how to measure and prioritize ESG factors at different stages of a company's life cycle, according to a company's industry, and technology use.
  •  how ESG creates value in M&A  beyond risk mitigation and learn the impact of ESG on target selection, valuation, and integration.
  • board and management responsibilities in overseeing and managing ESG-related risks, particularly in light of Caremark duties and Marchand.

Date & Time: Thursday, November 7 from 12:45 PM – 1:45 PM central time

Other topics that speakers will discuss include:

  • Supply chains and European due diligence 
  • Global regulatory and legislative developments
  • Sustainable governance

…

A federal jury found Matthew Panuwat liable for insider trading late last week.  As you may recall, the U.S. Securities and Exchange Commission (SEC) brought an enforcement action against Mr. Panuwat in the U.S. District Court for the Northern District of California back in August 2021.  In that legal action, the SEC alleged that Mr Panuwat violated Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5, seeking a permanent injunction, a civil penalty, and an officer and director bar. The theory of the case, as described by the SEC in a litigation release, was founded on Mr. Panuwat's deception of his employer, Medivation, Inc., by using information obtained through his employment to trade in the securities of another firm in the same industry.

Matthew Panuwat, the then-head of business development at Medivation, a mid-sized, oncology-focused biopharmaceutical company, purchased short-term, out-of-the-money stock options in Incyte Corporation, another mid-cap oncology-focused biopharmaceutical company, just days before the August 22, 2016 announcement that Pfizer would acquire Medivation at a significant premium. Panuwat allegedly purchased the options within minutes of learning highly confidential information concerning the merger. According to the complaint, Panuwat knew that investment bankers had cited Incyte…

My coauthor, SMU Law Professor James W. Coleman, recently posted a draft of our article, Metals Derivatives Markets and the Energy Transition, on SSRN.  It's forthcoming in Transactions: The Tennessee Journal of Business Law, and was written in connection with Business Transactions: Connecting the Threads VII, the BLPB-related conference at the University of Tennessee Law School.  I had a wonderful time at the event, which has become one of my yearly favorites, and am truly grateful for UT Law School's consistently outstanding hospitality! 

Here's the abstract of our article:

Despite their escalating importance, thus far, there has been minimal legal scholarship on metals derivatives markets. Given the key role of these markets in the transition to a clean energy future, increased focus on them is imperative. Hence, it is not surprising that the agendas for the last four meetings of the Commodity Futures Trading Commission’s Energy and Environmental Markets Advisory Committee each dedicated a significant portion of the meeting to metals derivatives markets and their role in the transition to a clean energy future.

Fundamentally, the United States and the world are moving from their long-term dependence on the fossil fuels that built the modern world…

Dear BLPB Readers:

I'm delighted to share that Professor Christopher Odinet has posted our new article, The Gamification of Banking, to SSRN!  This was such a fun article to write and I'm so grateful for the opportunity to coauthor with such an amazing scholar!  Here's the abstract:

"Gamification is coming to banking. This phenomenon is already gaining ground in advertising, healthcare, manufacturing, and, more recently, with the GameStop and AMC meme stock saga in securities trading. The idea behind gamification is to make transactions seem fun, playful, and even casino-like in order to elicit habit-forming, addictive-like effects with consumers. We argue that the rise of financial technology (fintech) firms and their ever-growing business relationships with incumbent financial institutions has created the necessary conditions for gamification to take hold in the banking sector. In order to explore this observation, we undertake a study of current examples of banking gamification and create a novel taxonomy of instances where fintech firms and banks offer financial products and services using business models that rely upon on high levels of customers, transaction activity and engagement, and that frequently use the power of social media and online communities. Through our…

This week, Nasdaq, “the second-largest stock exchange in the US,” announced its biggest deal yet: the $10.5 billion acquisition of Adenza, a software company focused on financial risk.  As I note in Derivatives and ESG, trading exchanges’ traditional business models have undergone a metamorphosis.  The largest global exchanges are increasingly becoming financial data and technology juggernauts.  Indeed, Nasdaq’s press release about the deal states: “Nasdaq Accelerates Its Transformation as a Leading Technology Provider to the Global Financial System with the Acquisition of Adenza from Thoma Bravo.” 

As I write about in Trading in the Clouds, a short piece for our 2022 BLPB Symposium Connecting the Threads VI hosted by the University of Tennessee College of Law, the continuing transformation of exchanges’ business models has also recently included significant partnerships between some of the world's largest trading exchange groups and the biggest cloud service providers, including Microsoft's partnership with the London Stock Exchange Group, Nasdaq's partnership with Amazon Webservices, and the Chicago Mercantile Exchange's partnership with Google Cloud.     

Here's the abstract for Trading in the Clouds:     

"Today, countless organizations rely upon cloud computing for operational and strategic reasons.

Yesterday, a new paper by Cecilia Caglio, Jennifer Dlugosz, and Marcelo Rezende – all affiliated with the Board of Governors of the Federal Reserve System – posted on SSRN, Flight to Safety in the Regional Bank Crisis of 2023.  It's obviously an incredibly timely piece.  Here's the Abstract:

"Using weekly confidential data from U.S. banks, we document an unprecedented flight to safety of deposits from regional banks towards large banks in the early 2023. We show that large banks experienced large deposit inflows relative to small and regional banks and that these differences remain substantial if we account for bank characteristics associated with bank failures over this crisis, including liquidation values and shares of uninsured deposits. Large banks lowered deposit rates relative to other banks during the crisis, supporting the hypothesis that deposits flew to these banks because they are considered safer."   

A few months ago, I asked whether people in the tech industry were the most powerful people in the world. This is part II of that post.

I posed that question after speaking at a tech conference in Lisbon sponsored by Microsoft. They asked me to touch on business and human rights and I presented the day after the company announced a ten billion dollar investment in OpenAI, the creator of ChatGPT. Back then, we were amazed at what ChatGPT 3.5 could do. Members of the audience were excited and terrified- and these were tech people. 

And that was before the explosion of ChatGPT4. 

I've since made a similar presentation about AI, surveillance, social media companies to law students, engineering students, and business people. In the last few weeks, over 10,000 people including Elon Musk, have called for a 6-month pause in AI training systems. If you don't trust Musk's judgment (and the other scientists and futurists), trust the "Godfather of AI," who recently quit Google so he could speak out on the dangers, even though Google has put out its own whitepaper on AI development. Watch the 60 Minutes interview with the CEO of…

My last post (here) addressed central bank digital currencies (CBDC).  I wanted to address this topic again today (and will do so again in the future!).  Michelle W. Bowman, a Member of the Board of Governors of the Federal Reserve System, recently gave a speech entitled, Considerations for a Central Bank Digital Currency.  She states “There are two threshold questions that a policymaker needs to ask before any decision to move forward with a CBDC. First, what problem is the policymaker trying to solve, and is a CBDC a potential solution? Second, what features and considerations–including unintended consequences–may a policymaker want to consider in deciding to design and adopt a CBDC?” 

Governor Bowman notes that “a CBDC is simply a new form of digital liability of a central bank…Beyond this baseline definition though, “what is a CBDC" defies a simple definition.”  There is “an array of CBDC design choices” and “policy tradeoffs that this multitude of choices presents.”

One of the policy tradeoffs related to design features that Governor Bowman addresses is privacy considerations. She states that “In thinking about the implications of CBDC and privacy, we must also consider the central role that money plays in…

Last week, I posted (here) about an important new article on the Fed and I’m doing that again this week.  Wharton Professor Christina Parajon Skinner’s Central Bank Digital Currency as New Public Money (forthcoming, University of Pennsylvania Law Review) is also a critical piece.  As the Introduction explains: “nearly every central bank around the world” is considering whether to create a central bank digital currency (CBDC).  Most payments are already digital.  Hence, it is important to realize that the impact of a central bank digital currency would be more than just payment digitization. 

Skinner states that “At least in the case of a U.S.-dollar CBDC, issued by the Federal Reserve, not only is a CBDC a fundamentally new monetary instrument, it also fundamentally alters – by weakening – the bundle of rights that State-issued money has heretofore conveyed to individuals holding public money.” (p. 9-10) And that “In many ways, as this Article will suggest, the nature of money implicates the very relationship between people and the State. In that sense, each nation’s decision about whether to pursue a CBDC will be highly dependent on its legal framework but also its political-economy values. Some States may well…

I've often blogged (for example, here and here) about the monumental importance of a seemingly mundane topic: access to a master account at the Federal Reserve.  So, I was delighted to read Professor Julie Anderson Hill's new article, From Cannabis to Crypto: Federal Reserve Discretion in Payments (forthcoming, Iowa Law Review).  It's an important piece about a critical issue.  Here's the abstract:

"From its inception, the Federal Reserve has operated payment systems that let banks move money for their customers. Checks, wire transfers, and electronic consumer payments all happen thanks to the Federal Reserve. Congress by statute specified which banks get access to the Fed’s payment services. For more than a century, the Federal Reserve provided services to all legally eligible banks. But when the Federal Reserve received requests for payments access from a cannabis-focused credit union and a cryptocurrency custody bank (both of whom are legally eligible), it denied them. The Fed also issued sweeping guidelines claiming discretion to conduct risk-vetting and deny bank requests. These guidelines apply to all banks and reverberate far beyond cannabis and crypto.

This Article examines whether the Federal Reserve’s payments discretion is as great as it now claims—a question that has been…