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Why the Federal Reserve is Dodd-Frank’s Big Winner

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At the height of the financial crisis, pundits and politicians were telling us all to expect an overhaul of financial regulation that would result in a brand new financial system. Those of us who study such matters knew the term “overhaul” was a bit hyperbolic, but genuine reform was certainly anticipated, and some might argue that Dodd-Frank was that genuine reform. Despite all the ink spilled about the impacts of Dodd-Frank, the post-crisis financial structure fails to look dramatically different than before. If anything, the major change in the post-crisis financial regulatory system is an increasingly powerful Federal Reserve.

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Harmony or Cacophony? A Preliminary Assessment of the Responses to the Financial Crisis at Home and in the EU

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J. Scott Colesanti
To be sure, the recent reforms to the U.S. regulatory system are far from final. Even if House Republicans do not succeed in turning back the clock, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) require so many studies, interpretations, and effectuating regulations that it will evade meaningful analysis for years. And while the nominally bipartisan Financial Crisis Inquiry Commission recently issued its report on causes for the financial crisis, that spirited document both spread the blame and disclosed infighting so as to cloud sufficiently any lasting impressions.

Separately, the European Union—tasked with confronting the same economic foes while facing its own legislative obstacle of supranationalism—has issued robust rounds of Directives, Regulations, and Recommendations. Similar to efforts in the United States, the culmination of these reforms will trigger debate about business regulation on that continent for years to come.

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In Dodd-Frank’s Shadow: The Declining Competitiveness of U.S. Public Equity Markets

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David Daniels
As we enter into 2011, things are looking up. The Dow Jones has recently broken through 12,000 and is climbing to pre-recession heights. The economy has emerged from the greatest downturn since the Great Depression and continues to show modest growth. Unemployment is slowly decreasing. But all is not well. A potentially worrying trend that gained traction at the beginning of the millennia continues to unfold: the decline of the competitiveness of U.S. public equity markets.

For example, consider the U.S. primary equity markets. In 2000, these markets attracted 54% of all global initial public offerings (IPOs)—IPOs by foreign companies issued on at least one public exchange outside the company’s domestic market. Similarly, foreign companies raised about 82% of the dollar value of all global IPOs on U.S. public exchanges.

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Questioning the 500 Equity Holders Trigger

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William K. Sjostrom, Jr.
An obscure provision of the Securities Exchange Act of 1934 (Exchange Act) has received unprecedented attention in recent months because of the prominent role it appears to be playing in Facebook’s decision on going public. Specifically, Exchange Act Section 12(g)(1) requires any company with “total assets exceeding [$10,000,000] and a class of equity security . . . held of record by five hundred or more . . . persons” to register such security under the Exchange Act. The measurement date for these thresholds is the last day of a company’s fiscal year. It then has 120 days from that date to register. Today, the practical effect of this rule is to force certain types of firms into the public markets earlier than is desirable. A shift from a shareholder-based trigger to one based on trading volume would preserve the Rule’s underlying policy concerns while mitigating this unintended effect.

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A Brief History of Hedge Fund Adviser Registration and Its Consequences for Private Equity and Venture Capital Advisers

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William K. Sjostrom, Jr.

Historically, hedge fund advisers have not had to register under the Investment Advisers Act of 1940 (the Advisers Act) because of the private adviser exemption. This exemption applied to an investment adviser who (1) had fewer than fifteen clients during the previous twelve months, (2) did not publicly hold itself out as an investment adviser, and (3) did not advise registered investment companies. Even though a hedge fund routinely has fifteen or more investors, hedge fund advisers were able to meet the fewer than fifteen client requirement because they only had to count as clients the funds they advised (which they were careful to keep at fourteen or fewer) and not individual investors in the funds.

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Distilling the Debate on Proxy Access

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David Page

In August 2010, the SEC issued its final rule on proxy access, which gives shareholders the right to place director nominees directly on the company’s proxy card, thereby sparing shareholders a large part of the expense of waging a traditional proxy contest. This rulemaking, and the SEC’s subsequent decision in October to delay implementing the rule pending a challenge from the Business Roundtable, has fueled a vigorous debate on the merits of proxy access and the details of its implementation. Some of the arguments made by commentators and academics are particularly interesting and useful in framing the contours of the debate.

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