HBLR PRINT

VOLUME 6.1

Disentangling Mutual Fund Governance from Corporate Governance
Eric D. Roiter

This Article addresses mutual fund governance, explaining how it has recently become entangled with the norms and rules of corporate governance. At one level, it is understandable that the Securities and Exchange Commission (SEC) and courts have viewed mutual funds as a type of ordinary corporation. Both mutual funds and corporations are separate legal entities, having directors and shareholders. Directors of each are held to fiduciary duties, charged with serving shareholders’ interests, and expected to aspire to best practices. However, there are fundamental differences between mutual funds and ordinary corporations. This Article contends that these differences have important implications for governance, differences that should lead to the disentanglement of mutual fund governance from corporate governance.

Where Have All the IPOs Gone? The Hard Life of the Small IPO
Paul Rose and Steven Davidoff Solomon

We examine firm lifecycles of 3,081 IPOs from 1996–2012. We find that small IPOs have a different lifecycle than other, larger companies. Within five years of an IPO, only 55% of small capitalization companies remain listed on a public exchange, compared to 61% and 67% for middle and large capitalization companies, respectively.  We examine various theories explaining the decline of the small IPO. We find only minor evidence that regulatory changes caused the decline of the small IPO. The decline appears to be more attributable to the historical unsuitability of small firms for the public market. Absent economic or market reforms that change small firm quality, further regulatory reforms to enhance the small IPO market are thus unlikely to be effective or bring firms into the public market that have the horsepower to remain publicly listed.

The Conflict Minerals Experiment
Jeff Schwarz

In Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress instructed the Securities and Exchange Commission (SEC) to draft rules that would require public companies to report annually on whether their products contain certain Congolese minerals. This unprecedented legislation and the SEC rulemaking that followed have inspired an impassioned and ongoing debate between those who view these efforts as a costly misstep and those who view them as a measured response to human rights abuses committed by the armed groups that control many mines in the Democratic Republic of the Congo. This Article for the first time brings empirical evidence to bear on this controversy.

HBLR ONLINE

VOLUME 7

A Federal Fiduciary Standard Under the Investment Advisers Act of 1940: A Refinement for the Protection of Private Funds
Tyler Kirk

December 6, 2016

The appropriate role of the fiduciary standard in the financial industry has garnered a lot of attention of late. However, what has gotten lost in the debate is the astonishing fact that Article III courts have barely begun to interpret one of the oldest federally established fiduciary relationships, that of the investment adviser and its client. This Article argues that an investment adviser’s liability under section 206–when acting as the agent for a private fund–should be determined under a federally established uniform framework, and should not be contingent upon the application of state fiduciary law.

Increased Antitrust Merger Enforcement: Considerations For Your Next Deal
Michael B. Bernstein, Justin P. Hedge, and Francesca Pisano

December 5, 2016

Antitrust merger enforcement has become increasingly aggressive in recent years with the Federal Trade Commission and Antitrust Division of the Department of Justice demonstrating that they are ready to litigate to block deals they believe will harm competition. While an increasing number of mergers have been challenged and blocked in federal court, some are prevailing at trial or managing to find a path to clearance without litigation. This Article reviews the trends that have emerged in federal merger enforcement and discusses some key differences between deals that have been cleared and those that have faced government opposition.
 

Bitcoin and Virtual Currencies: Welcome to Your Regulator
Matthew Kluchenek

December 3, 2016

Among all the U.S. regulators interested in regulating Bitcoin and virtual currencies, the Commodity Futures Trading Commission (CFTC) is determined to be at the forefront. Since the announcement by CFTC Chairman Timothy Massad in late 2014 that Bitcoin derivatives should fall within the scope of the CFTC’s jurisdiction, the CFTC has been aggressive in addressing not only wrongful conduct involving Bitcoin derivatives, but also wrongful conduct involving certain spot Bitcoin transactions. The CFTC’s actions are a clarion call for market participants to understand the broad breadth of the CFTC’s jurisdiction, and to take notice of the requirements that may apply both to derivatives and to certain physical transactions involving Bitcoin and other virtual currencies.