Fordham Journal of Corporate & Financial Law 

About: Fordham Journal of Corporate & Financial Law is an academic journal. The journal publishes majorly in the area(s): Corporate law & Corporate governance. It has an ISSN identifier of 1532-303X. Over the lifetime, 260 publications have been published receiving 1238 citations.

Securities Regulation in Low-Tier Listing Venues: The Rise of the Alternative Investment Market

Abstract: I. INTRODUCTION In recent years, participants in the world's capital markets witnessed a shift in the tide of international listings. As the U.S. financial market rapidly loses its standing as the center of the global economy, other countries eagerly rise to challenge its dominance. In the aftermath of the Enron collapse and the "dot com" bubble burst, investors and other market participants are turning away from the regulatory burden imposed by the rigorous U.S. securities framework. While some favor delisting,1 others seek jurisdictions with less stringent regulation in which the costs of being a public company are comparatively lower.2 By reducing the cost of listing and remaining listed, this trend allows systems that feature lighter levels of regulation and specialized market segments to thrive. These events might well be considered symptoms of global regulatory competition among securities regulators and stock exchanges.3 The worldwide growth of competing trading fora and a stirring movement for reform in the U.S. have given new life to an old debate concerning the proper degree of regulatory stringency for financial markets. Ascertaining the level of securities regulation that will prove most effective in increasing overall social welfare is not an easy task. A straightforward cost-benefit examination might be insufficient to solve this problem, since it is difficult to quantify the economic effects of securities regulation.4 In any case, an optimal securities framework should strike a balance between investor protection and compliance costs for listed companies.5 The tension lies in introducing proper measures to attain such a balance, while still allowing for the development of a deep and liquid capital market. For instance, even if prophylactic regulation boosts investor confidence in the market, thereby enhancing liquidity, such rules can increase the costs of equity issuances beyond reasonable boundaries.6 This situation could induce public companies to de-list or to seek alternative listing venues.7 Yet, lighter levels of regulation could lead to market failures, eroding investor confidence to a point in which liquidity is constrained and a crash ensues.8 Two moments in U.S. capital market history provide further insight. The 2002 Sarbanes-Oxley Act9 ("SOX") is often criticized for increasing listing costs in the U.S.10 SOX was merely the product of a legislative reaction following a market crash, however, which brings to mind the response to the 1929 collapse that prompted the U.S. Congress to pass the Securities Act of 1933(11) and the Securities Exchange Act of 1934.12 Although the 1930's measures and minor subsequent amendments significantly raised listing costs, they created a framework in which the U.S. market flourished for several decades.13 Scholars argue that despite its higher costs, SOX's dissuasive effect on fraudulent behavior will generate net long-term benefits.14 Moreover, well-known regulatory figures, like former Securities and Exchange Commission ("SEC") chairman Arthur Levitt, call for the implementation of still stronger measures in the United States.15 Nevertheless, proponents of a lighter approach to securities regulation abound in the U.S. and abroad.16 As companies flee from the burden of U.S. regulation, policy-makers and scholars argue for an alleviation of local regulatory requirements for listed companies. The Report of the Committee on Capital Market Regulation (informally dubbed the "Paulson Report," after U.S. Treasury Secretary Henry Paulson) set the tone for reform by pointing out the erosive effect of regulatory intensity on U.S. dominance and competitiveness.17 The publication of the Paulson Report was followed by a study conducted by the Commission on the Regulation of U.S. Capital Markets in the 21st Century.18 The argument of this more recent report hinges on a comprehensive overhaul of the U.S. securities framework, focusing on the federal government's regulatory approach to financial markets and the SEC's powers regarding SOX. …

Corporations are People Too: A Multi-Dimensional Approach to the Corporate Personhood Puzzle

Abstract: I. INTRODUCTION During the last year, controversy has raged over the unprecedented amount of money authorized by Congress to bail out failing corporations. Mega-corporations like AIG, Citigroup, and Bank of America, have received billions of dollars in federal aid.1 Auto industry giants also received massive bailout funds.2 The policy underlying the decision to rescue such companies was that they are simply too large to be allowed to fail. Their role in the economy, the millions of jobs they provide, and the investments they support, are all deemed to be so significant that letting certain corporations fail completely would arguably have disastrous consequences.3 Opponents of government bailouts asserted that mismanagement and/or greed caused the corporations to falter and, therefore, these companies deserve to be dismantled by the free market. The feeling is that they made their bed, and now they must lie in it. Giving them billiondollar hand-outs is simply throwing good money after bad. We are not obligated to nourish these giant corporate persons or even to preserve their existence. Interestingly, the bailout debate raises deeper questions about what it is, exactly, we are bailing out. Who or what is it that we are trying to save? Is it the millions of employees who depend on the continuation of the corporation for their jobs? Is it the shareholders who have risked their capital by investing in the corporation? Is our concern for the customers who look to the corporation to provide essential goods and services? Are we trying to help the suppliers, vendors, and communities that depend on their ongoing relationships with the corporation for their own survival? Or, more cynically, does saving the corporation mean saving the politicians whose political careers are dependent on large annual corporate contributions? Proponents of corporate bailouts seem to believe the corporation is an aggregate of all those human beings who participate in and depend on the success of the corporate enterprise. When we save the corporation, we are really saving all the individuals who are behind it.4 Critics of this approach seem to view the corporation differently. They see the corporation as a separate entity that either succeeds or fails on its own merits. When a corporate person is dysfunctional or begins to fail due to its own systemic weaknesses, then that corporate person should be left alone to die.5 Our belief in the survival of the fittest gives us confidence that other corporate entities that are healthier and more efficient will rise up and take the place of weaker ones. The national debate over bailing out corporations reveals that the corporation itself means different things to different people. These contrasting views of the corporation reveal fundamental concerns about the nature of the corporation and its status as a person in our society. This component of the debate is not new. Whether or not the corporation should be viewed as a separate person that owes and is owed certain obligations has puzzled legal theorists for years.6 Because of the meaning and value we attach to personhood in our society, deciding whether a corporation is a person helps us decide what its rights and duties are and how we can expect it to behave. It gives us a normative framework for how we should view corporations, how they should be treated, and how they should treat us.7 Some argue that the corporation is not a person at all. It is merely a legal construct, a fictional entity, an artificial creation of the natural persons who form the corporation for their own purposes.8 It has no real, independent ontological existence of its own. It has no body, mind, or soul. The corporation is simply a creature of statute and is dependent on the law to give it form and function. Others argue that the corporation is not so much a creature of law as it is an association forged by the mutual agreement of the individuals composing it. …

Payday Lending: Do Outrageous Prices Necessarily Mean Outrageous Profits

Abstract: I INTRODUCTION The payday lending industry has suffered from a poor public perception based at least in part on inconclusive data The public, hearing horror stories of payday loans gone wrong, appears to believe that the entire industry needs to be regulated One assumption for regulation is that payday lenders make an enormous profit from their services1 This assumption is grounded in the relatively high cost of short-term credit obtained through payday lenders2 As a response to poor public perception, the industry has searched to justify itself, falling on the explanation that operating costs and loan losses require the high fees associated with their loans Without hard data indicating that payday lenders are making extraordinary profits, however, this call for regulation is without foundation To date, no conclusive data has been presented to either justify or refute the claims of either consumer groups or the industry This article does not suggest that payday lending is a desirable service, or that the industry should be entirely free from regulation Rather, this article intends to provide the reader with an objective financial analysis, along with conclusions, of seven publicly traded payday lenders The payday lenders in this study have been analyzed against six commercial lenders and one large company with a similar business model3 The study shows that, despite the common belief, payday lending firms do not always make extraordinary profits In fact, when compared to many other well-known lending institutions, payday lenders may fall far short in terms of profitability4 If that is the case, then the call for regulation should be based solely in principle, moral, or other subjective reasoning-not on high fees5 This article attempts to shed light upon two specific aspects of the payday lending industry First, it will provide more information regarding the typical payday borrower6 Next, it provides insightful financial data regarding the typical payday lending company7 New information regarding the typical borrower is available from the Colorado study as well as from an in-depth investigation by the Federal Deposit Insurance Corporation ("FDIC")8 Additionally, this article discusses the financial and operating results of individual stores within one publicly-traded payday lender9 Finally, by reviewing the operating results of seven publicly-traded payday lenders, this article provides profitability information upon a relatively unexplored market10 II THE HISTORY AND BACKGROUND OF PAYDAY LENDING A The Emergence of Payday Lending Methods of providing short-term financial solutions to others are not new In the early twentieth century, "salary buyers" offered to purchase a consumer's paycheck in advance at a discount11 For instance, a lender would give the borrower $20 today for the right to receive athe borrower's next paycheck of $2412 This market arose for a number of reasons: with many people moving from rural to urban areas, and with a significant influx of immigrants, there was a large supply of manpower for a small number of jobs As a result, meeting cash-needs was challenging for many people Banks were not offering small-dollar short-term cash loans because they were considered too "risky" Additionally, few of the borrowers had assets with which to secure a loan13 The salary-buying industry arose to meet the needs of this underserved market14 In the 1980s, new factors created a similar need for short-term cash loans The deregulation of the banking industry, the absence of traditional small loan providers and the elimination of interest rate caps set the stage for the emergence of payday lending15 As banks eliminated less profitable services (such as short-term loan services), families and individuals in need of short-term cash flow were left with nowhere to turn16 While the payday lending market emerged at about this time, many consider the father of "modern" payday lending to be W …