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Three Ages of Bankruptcy
The shifts, rises, and falls among decision-making systems have previously been explained by successful evolution in bankruptcy thinking, by the happenstance of the interests and views of lawyers that designed bankruptcy changes, and by the interests of those who influenced decision-makers. Here I argue that these broad changes also stem from baseline market capacities, which shifted greatly over the past century; I build the case for shifts underlying market conditions being a major explanation for the shifts in decision-making modes. Keeping these three alternative decision-making types clearly in mind leads to better understanding of what bankruptcy can and cannot do and facilitates stronger policy decisions today here and in the world’s differing bankruptcy systems, as some tasks are best left to the market, others are best handled by the courts, and still others can be left to the inside parties to resolve.
This Article fills a current void in the corporate scholarship by analyzing whether two particular kinds of outside agents—credit rating agencies and proxy advisory firms—should be given skin in the game. The “skin” would be a financial incentive tied to the success of the agent’s service: rating agencies would be paid with the debt instruments they rate, and proxy advisors with share-based payment. The analysis is heavily based on principal-agent literature. The Article then applies theoretical insights derived from that literature and analyzes whether skin in the game would likely be beneficial with regard to proxy advisory firms and credit rating agencies. It concludes that the skin in the game approach would likely be beneficial when dealing with rating agencies, but should be employed cautiously when dealing with proxy advisory firms.
Rather than completely eliminating the SEC Whistleblower Program created by Section 922 of that Act, I propose a legislative solution to the split in the Federal Circuit Courts of Appeals regarding the scope of the program’s anti-retaliation protections. I begin by highlighting the imprecision of the concepts and terminology of whistleblowing. Then, after closely considering the history of the SEC whistleblower program and the split between the circuits, I discuss the underlying policy basis for the program and corporations’ objections to it. Finally, I propose that—in furtherance of both the policy basis for Dodd-Frank and in light of corporate concerns—lawmakers should amend 15 U.S.C. § 78u-6(h) to clearly protect individuals who disclose securities law violations within their corporations.
This Article critically examines the transformation of the financial services industry during and since the financial crisis of 2007–2009. First, this Article argues that private equity firms now mirror investment banks in their mix of activities; ethos of entrepreneurialism, innovation, and risk-taking; role as “shadow banks”; and overall power and influence. These similarities might suggest that private equity firms pose financial risks similar to those caused by their now-defunct predecessors. But, this Article suggests that private equity firms, as currently structured, are more financially stable and pose less systemic risk to the global economy. Importantly, however, this Article cautions that ongoing changes in private equity firms’ broker-dealer activities raise systemic concerns that require active regulatory monitoring. The Article also identifies systemic and financial stability concerns arising from the funds that these firms manage, particularly their hedge and credit funds, about which little detailed information is publicly available.