Tagged: securities law
As the Senate is poised this week to vote on the House-passed compromise bill reforming the financial regulatory system, Law Professor Tamar Frankel, an authority on securities law and author of “Trust and Honesty: America’s Business Culture at a Crossroad,” speculates about the future of derivatives trading once the reform act is enacted. More important than regulating the trading of derivatives, the instruments that helped bring down the financial system in 2008, Frankel feels that citizens should turn away from the “medicine men” (and women) who created the risky bets.
“Unless the geniuses who created the enormously risky ‘risk reducers’ and those who sold them take part of what they sell, and never again bet against what they have created and sold, we will continue to have the enlightened age of a sophisticated financial system — unemployment, enormous national debt, and the death of the middle class that used to be America’s backbone.”
Contact Tamar Frankely, 617-353-3773, firstname.lastname@example.org
A federal judge okayed a $150 million Bank of America settlement with the SEC to end civil charges accusing the nation’s largest bank with misleading shareholders when it acquired Merrill Lynch. But law Professor Elizabeth Nowicki, both a former SEC and Wall Street attorney, says it is likely a short-lived “win” for BofA because the judge said in his written opinion that the bank failed to adequately disclose facts to its shareholders.
“It will turn out to be a huge loss for BofA given that the lawyers in the other pending lawsuits against it will use the judge’s words in the settlement opinion to help guide their litigation.”
Contact Elizabeth Nowicki, 617-353-2807, email@example.com
Reports say investigators into Bernard Madoff’s alleged “Ponzi scheme” are looking at some of his wealthy clients who may have known that the returns on their investments were unrealistically high. School of Law Professor Tamar Frankel, a securities law expert and Israeli native, says this would violate both securities law and Jewish law.
“Jewish law forbids any person from harming another, directly or indirectly. In addition, a person must take steps to make sure that no injury is caused by himself or others. A person may not aid others or allow others to violate Jewish law (which includes a prohibition on stealing). A person must take affirmative actions to prevent others from violating the law. Civil and criminal law may not be as strict, but its spirit is the same.
“The scary part in the developments in Madoff’s saga is the possibility that a large group of those who accepted his largess suspected the truth. And, rather than escape, they continued to enjoy the ‘profits’ he paid. The saddest part is that Madoff’s investors may represent today’s culture in the financial system where the wealthy set the tone and show the way to those who seek wealth.”
Contact Tamar Frankel, 617-353-3773, firstname.lastname@example.org
Law Professor Tamar Frankel, an authority on securities law, corporate governance, and legal ethics, comments on grand juries looking into actions of Lehman Brothers.
“Do not blame Lehman Brothers. The examinations of its actions are unnecessary. Many large financial institutions adopted the same practices and developed the so-called market that we now have.
“Rationally, a market can convert a long-term obligation into a short-term one (auction-based securities); a market can determine the magnitude of risks and offer protection by institutions that do not have the assets to cover the risk they cover; a market can ‘correct’ prices. Market price can be established by three or four rating agencies; a market depends on trusted sales person who deliver sales talk.
“Of course we do not mean the market. We mean the financial intermediaries — those that create and encourage and control and manage the market in other people’s money. And a market can resolve any problems that may arise. And this kind of market administers its ‘corrections.’ It may well be that we had no financial market for quite some time.
“It made good sense for Lehman to avoid investor ‘run.’ The FDIC does it for the banks, but investment bankers did not have an FDIC. They have to calm investors and try to find a solution. Had we had a regular market, the actors’ demise or financial difficulties would not have threatened the system. The rule of immediate disclosure should have applied to them.
“But this is no regular market, and Lehman is no regular intermediary but a huge one among very few. So if Lehman attempted to protect the system by postponing disclosure in the hope of getting help, it tried to serve the system. The fact that it did not succeed is irrelevant. It was the FDIC of itself.
“What is the purpose of the Lehman investigation? Prosecution is not justified, except perhaps to demand the accounting for profits by management. Discovery of the detailed truth is not helpful. In the future, other gimmicks will appear that we cannot predict today and devastate our so-called market.
“Unless we use and revive the antitrust law and forget for just a few year about ‘efficiencies’ and ‘synergies’ and other fine concepts that justify concentration of power which is killing us now, we will achieve little even if Lehman is prosecuted. The prosecutors should apologize for refraining to enforce the law that regulates people (not institutions, but those who control institutions) that hold other people’s money and play with it as if it is their own, while stashing their own safely.”
Contact Tamar Frankel, 617-353-3773, email@example.com
The following Boston University professors are available to comment on the various aspects of the financial crisis:
School of Management Professor Mark Williams, an expert on risk management and former Federal Reserve Bank examiner who teaches in the school’s Finance Department.
School of Management Professor James Post, an expert on corporate governance and business ethics. He teaches a course called “Corporate Governance, Accountability, and Ethics.” He is the author of “Business and Society: Corporate Strategy, Public Policy, Ethics” (McGraw-Hill).
School of Management Professor Zvi Bodie, a widely recognized expert on pension finance, social security reform.
School of Management Professor Scott Stewart, an investment management expert and former Fidelity funds manager.
School of Law Professor Cornelius Hurley, director of the school’s Morin Center for Banking and Financial Law. He is former chief counsel to the Fed Board of Governors.
School of Law Professor Tamar Frankel, an authority on securities law, corporate governance, and legal ethics. She is the author of “Trust and Honesty: America’s Business Culture at a Crossroad” (Oxford U. Press) and “Securitization” (2nd ed. 2006).
School of Law Professor Charles Whitehead, a securities law expert. He spent 20 years as an in-house counsel in international securities and banking.