Finance

The Week in Review: FB, BNY Mellon, and Cybersecurity

By Christopher Hammond, J.D. Candidate 2015 | Posted on

Facebook (FB) has cleared an important legal hurdle, as a S.D.N.Y. district court dismissed a lawsuit regarding its fumbled IPO last May.  The plaintiffs had argued that CEO Mark Zuckerberg and other directors should be liable for selectively disclosing negative measures of the company’s performance.  Judge Sweet disagreed.  Unsurprisingly, a Facebook representative said they were “pleased with the court’s ruling.”  For more, see CNBC.

The IRS won a major case in U.S. Tax Court earlier this week, and the ruling could cost the Bank of New York Mellon more than $800 million.  The dispute arose from Structured Trust Advantaged Repackaged Securities (STARS) – essentially manufactured tax shelters marketed by the bank.  In ruling against BNY Mellon, the Court held the STARS program was a “subterfuge for generating, monetizing and transferring the value of foreign tax credits.”  For more, see the Wall Street Journal.

In a follow-up to a previous Network post, President Obama has signed an executive order on cybersecurity.  However, the President’s order does not reach tough new regulations on private companies, falling short of last year’s proposed legislation, and does not allow for broad information sharing with government intelligence agencies as proposed by CISPA.  Congressional reaction to the executive order is yet to be determined—some commentators view the move as taking pressure off Congress to act on cybersecurity this term, but even President Obama, in his State of the Union address last night, addressed the need for a comprehensive law.  For more, see CNET and BBC.

Saudi Arabia’s Real-Estate Finance Laws

By Maha Al-fozan, LL.M. Candidate 2013 | Posted on

In July 2012, Saudi Arabia witnessed the official launch of the real-estate finance industry as part of the country’s economic financial development plans.  To promote the local competition between banking and other financial sectors, and the economy’s overall global competitiveness, non-banking corporations may now finance real estate in Saudi Arabia.

The Real Estate Development Fund (“REDF”) is the country’s main provider of housing finance.  REDF was unable to meet the rapidly increasing demand, while other real estate financing was limited due to absence of a well-structured regulatory framework.  For example, the industry lacked effective land registries and foreclosure regulations for properties in default.  Individual real estate financing was done against the transfer of title deeds rather than as an official mortgage.  In addition, lenders have been conservative with their loan standards, resulting in a low mortgage penetration rates.

Making mortgages available to public will address the imbalances occurring in the market with supply twisted to the high end.  The new Saudi laws tackle the chronic shortage of home ownership, particularly in the affordable middle- and lower-end markets.  More financing opportunities are needed, even though additional time may be required for the market to safely adopt such laws.

These laws are tools to open safe and continuous investment channels.  They encourage national economy leaders to diversify income sources and create job opportunities and investments in the country.  They also satisfy growing demands for appropriate and safe housing offers.  These steps aim to develop mechanisms that preserve homeownership rights, while stimulating financial institutions to lend more frequently, reduce the cost of mortgage financing and provide differentiated products for multiple segments of society.

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LIBOR Consultation Document Opened

By Flore Poughon, LL.M. Candidate 2013 | Posted on

In response to the recent LIBOR scandal, Michel Barnier, the European Commissioner for Internal Market and Services, has opened a consultation document on the continuing viability of the benchmark rate.  The move is unsurprising to many observers of European financial markets, where multi-state collaboration is essential to the outcome’s perceived legitimacy.  As mentioned in a previous post, U.S. CFTC Chairman Gary Gensler recently commented on the LIBOR’s future.  The issue is undisputedly important, as rate manipulations may seriously impact market integrity, result in significant losses to consumers and investors, and distort the real economy.  The consultation document, which will be open through November 15, follows an initial legislative proposal period, and sets the stage for the EU’s final response to widespread concerns regarding LIBOR.  This post will discuss the now-completed proposal process, newly adopted amendments, and the European Commission’s response to persistent criticisms and concerns.

On July 25, 2012, the European Commission adopted amendments to the proposal for a Regulation and a Directive on insider dealing and market manipulation.  The long-awaited initial legislative proposal to revise the Markets in Financial Instruments Directive (“MiFID”) was made on October 20, 2011.  The original MiFID came into force in November 2007—intended to enhance investor protection, improve cross-border market access, and promote competition in the financial markets across the EU.  Although MiFID has arguably achieved some of these aims, many commentators have suggested that the system ought to better reflect the lessons learned from the financial crisis and developments in the markets.

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BCLBE Symposium Recap: Unlocking Capital for Efficiency Improvements

By Christopher Hammond, J.D. Candidate 2015 | Posted on

Last Friday, October 5, 2012, the Berkeley Center for Law, Business and the Economy co-hosted a symposium in San Francisco, entitled:  “Where is the money?  Unlocking Capital for Real Estate Efficiency Improvements.”

The event included presentations from leaders in law, finance, energy, and policy—all addressing the lack of adequate funding models for energy efficient remodels and retrofits.  Panels throughout the day covered energy improvement risk from owners’ and lenders’ perspectives, underwriting challenges, recent technology improvements to fill critical data gaps, bond and secondary markets, and state and federal financing policies and initiatives.  United States Senator Ron Wyden, D-Oregon, and John Chiang, California’s State Controller, were in attendance.  This is the first in a series of posts that will summarize the event, its recommendations and forecasts. (more…)

The SEC’s Limit Up – Limit Down Rule Can Help Markets, But Does It Go Far Enough To Address High-Frequency Trading?

By Andrew Siosin, J.D. Candidate 2013, UC Berkeley School of Law | Posted on

The BATS IPO was an ironic disaster. BATS, a stock exchange that billed itself as the future of stock trading, botched the IPO of its own stock, which was supposed to be listed on the BATS exchange beginning March 23rd. According to the company, the failure was caused by a software bug, and not by high-frequency trading algorithms, as some have speculated. Not only did the failure cause BATS to abandon its own IPO, it also rattled shares of Apple, mirroring the events of the 2010 Flash Crash.

While the IPO was an embarrassment for BATS, it put the SEC’s regulatory response to the Flash Crash on display. The 2010 Flash Crash was a series of events that caused the Dow Jones Industrial Average to plummet more than 700 points in a matter of minutes, only to recover within a half hour. In response to the Flash Crash, single stock circuit breakers were established to curb the effects of extreme market volatility. By most accounts, single stock circuit breakers have been effective in restoring order to markets after numerous test runs during other “mini flash crashes,” hitting a high of 51 in December of 2011.

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The Network Lecture Series: The Optimal Corporate Bailout – A Presentation by Professor Eric Talley

By Joseph Santiesteban, J.D. Candidate 2013, U.C. Berkeley School of Law | Posted on

By Joseph Santiesteban, J.D. Candidate 2013, U.C. Berkeley School of Law, with contribution by Professor Eric Talley, Rosalinde and Arthur Gilbert Professor of Law; Director, the Berkeley Center for Law, Business, and the Economy

Introduction

In 2008-09, when the government spent $350 billion dollars bailing out corporations that it deemed systemically important, it confronted several issues. First, which companies should be bailed out? Second, what should the terms of the bailout be? And third, how should the program be funded. On March 20th at Berkeley Law’s weekly Law and Economics Workshop, Berkeley Law Professor Talley Eric Talley presented “A Model of Optimal Corporate Bailouts,” a paper he co-authored with UCLA Business School Professors Antonio Bernardo and Ivo Welch, which attempts to confront these issues with a theoretical model and compare their results to the Troubled Asset Relief Program (TARP).

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Second Circuit Set to Reign in Rakoff

By Peter Benesch, J.D. Class of 2013 | Posted on

On March 15, the Second Circuit stayed proceedings in the now notorious case of SEC v. Citigroup. The case hit headlines last November when District Court Judge Rakoff refused to accept a $280 million settlement agreement between the SEC and Citigroup. Judge Rakoff’s decision was outlined in great detail in a previous post on the Network.

By granting a stay in the proceedings, the Second Circuit is allowing the SEC and Citigroup to avoid having to proceed with the trial litigation while appealing Judge Rakoff’s decision. The appeal is scheduled to be heard in September, though the dicta in the March 15 decision appears to support the position that the Second Circuit is prepared to overturn Judge Rakoff’s decision.

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Century Bonds- A Not-So-Rare Animal After All?

By By Sunita Advani, L.L.M Class 2012 | Posted on

In August 2011, the University of Southern California joined Yale University and the Massachusetts Institute of Technology (‘MIT’) in selling $300 million of 100-year bonds, also known as ‘century bonds’. In October 2011, Ohio State University (‘Ohio State’), the most recent investment-grade borrower, issued $500 million of taxable AA-rated century bonds. These institutions of higher education are heating up the century bond market, once considered a rather rare bond.

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