Rollback Back Repo Safe Harbors Edward R. Morrison, Mark J. Roe, and Christopher S. Sontchi, 69(4): 1015-1048 (August 2014) In recent decades, exemptions from the normal application of the Bankruptcy Act for reverse repurchase agreements have increased significantly. These repurchase agreements, which correspond to very short-term (often one-day) secured loans, are exempt from basic bankruptcy rules such as automatic deferral ordering recovery, rules against fraudulent transfers before bankruptcy and rules against preferential payments before bankruptcy to beneficiary creditors compared to other creditors. While these exemptions may be justified for U.S. Treasury securities and similar liquid bonds backed by the full confidence and solvency of the U.S. government, they are not justified for mortgage-backed securities and other securities that may prove illiquid or unable to reach their expected long-term value in the event of panic. Derogations from the basic insolvency rules facilitate this type of panic selling and, according to many expert observers, characterized and exacerbated the financial crisis from 2007 to 2009. Exceptions to normal bankruptcy rules should be limited to the U.S. Treasury and similar liquid securities as they once were. The recent extension of these exemptions to mortgage-backed securities should be cancelled. An inter-creditor agreement, as the name suggests, is an agreement between different creditors of a joint borrower that establishes the relationship between creditors and often addresses issues such as priority payments, subordination of liens, and lawsuits in the event of the borrower`s bankruptcy.
This column has dealt with issues of intercredit and subordination on several occasions over the past twelve years.1 During this period, the institutional second-tier debt market and the corresponding importance of creditor agreements have increased enormously. Today we are discussing the model intercredit agreement recently approved by an American Bar Association working group for the negotiation of intercredit agreements between a lender or credit syndicate that enters into commercial loans secured by a first priority lien on certain guarantees (first lien) and a lender or credit syndicate that grants commercial loans secured by a previous second lien on the same 2 Mechanisms for Financial Innovation and Governance: The Evolution of Decoupling and Transparency Henry T.C. Hu; 70(2): 347-406 (Spring 2015) Financial innovations have a fundamental impact on critical content-based corporate governance mechanisms. „Decoupling“ undermines the classic understanding of the distribution of voting rights among shareholders (e.B. via „empty vote“), creditor control rights (e.B. via „empty credit“ and „hidden interest“) and takeover practices (e.B. via „transformable property“ in order to circumvent disclosure in accordance with § 13 (d) and avoid triggering certain poison pills). Stock-based compensation, management performance monitoring, the corporate governance market and other governance mechanisms that depend on a robust information predicate and market efficiency are undermined by the transparency challenges of financial innovation. The basic approach to information that the SEC has always used – the „descriptive mode“ that relies on „intermediate representations“ of objective reality – is obviously not sufficient to capture very complex objective realities such as the realities of large banks that are heavily linked to derivatives.
Ironically, the government`s main response to such transparency challenges — a new disclosure system that went into effect in 2013, the first since the SEC`s inception — also creates difficulties. This new parallel disclosure system, developed by banking regulators and applicable to large financial institutions, is not primarily focused on the well-known transparency objectives of investor protection and market efficiency. As a starting point, this article provides a brief overview: (1) of the analytical framework for „decoupling“ developed in 2006-2008 and its calls for reform; and (2) the analytical framework developed in 2012-2014 to reinvent „information“ in three „modes“ and address the two parallel disclosure universes. With regard to decoupling, the article analyses some important developments after 2008 (including the state of reform efforts) and the way forward. It provides a detailed analysis of TELUS` December 2012 landmark opinion before the Supreme Court of British Columbia, which includes perhaps the most complicated public example of decoupling to date. The article discusses recent actions by the Delaware judiciary and legislature, the European Union, and bankruptcy courts — and the urgent need for further SEC action. At the time research on debt decoupling was introduced, the available evidence of the importance of the phenomenon was limited. This article helps fill that gap.
With regard to information, the article first describes the calls for reforms related to the 2012-2014 analytical framework. With the revolutionary advances in computer and web technologies, regulators no longer have to rely almost exclusively on the descriptive mode rooted in intermediate representations. Regulators must also start systematically using the „transfer mode“ based on „pure information“ and the „hybrid mode“ based on „moderately pure information“. The article then highlights some of the key ways the new analytical framework can contribute to the SEC`s comprehensive and long-needed new initiative to address „disclosure effectiveness,“ even in „hard-to-present“ contexts that have nothing to do with financial innovation (e.B. pension disclosures and high-tech companies). The article concludes with a concise version of the analytical framework thesis that the new morphology of public information – consisting of two parallel regulatory universes with different objectives and means – is not sustainable in the long term and involves certain questions that require a legal solution. However, some steps involving coordination between the SEC, the Federal Reserve and others may be taken in the meantime. The Business Lawyer at 75 and Secured Transactions Pursuant to Section 9 of the Uniform Commercial Code Jonathan C. Lipson and Steven O. Weise75(1): 1575-1596 (Winter 2019-2020) In honor of the seventy-fifth anniversary of The Business Lawyer (TBL), we reviewed the approximately 400 articles published in TBL on secured transactions since its inception in 1946.
We note that while TBL has always provided excellent coverage of secured loans, previous work has focused more on policy issues than more recently published, which tend to be more technical. This is strange, on the one hand, because secured transactions in other journals have sometimes led to heated academic debates about their distributive effects, and on the other hand because TBL often involves policy-oriented science in other areas of business law (e.g. B corporate governance). We argue that TBL should actively seek documents on secured credit policy, in part because technologies such as distributed ledgers can threaten to carry out all secured transactions. .