HBLR Online Volume 6 (2015-2016)

HBLR Online is a portal to timely pieces about recent developments in business law. As an important forum for opinion and scholarship, HBLR Online is designed to be a cutting edge guide to developments in the field of business law. HBLR Online also provides opportunities for student members to develop their own editing and writing skills. Accordingly, HBLR Online will contain pieces by students as well as outside contributors.

It Ain’t Broke: The Case For Continued SEC Regulation of P2P Lending
Benjamin Lo (August 9, 2016)
In 2008, the Securities and Exchange Commission made waves by deciding to regulate the nascent peer-to-peer lending industry. Only two lending platforms survived the SEC’s entry into a previously lightly-regulated market. Under this regulatory setup, the SEC would regulate the lending-investing process, while other agencies like the Consumer Financial Protection Bureau and Federal Trade Commission would regulate the borrower side of the business. This Article argues that the existing bifurcated system works and is continually getting better as the SEC amends existing exemptions and introduces new regulations to smooth the path for financial innovation.

Memorandum to the Compliance Counsel, United States Department of Justice
Jonathan J. Rusch (April 2, 2016)
Since 1977, with the enactment of the Foreign Corrupt Practices Act, the United States Department of Justice has played a leading role in applying the Act’s anti-bribery, books and records, and internal controls provisions in enforcement proceedings against numerous companies and individuals worldwide. In November 2015, the Department of Justice took the unprecedented step of hiring a Compliance Counsel to guide its prosecutors in decision-making in corporate prosecutions and in benchmarking corporate compliance. This Memorandum is composed as an open letter to the Compliance Counsel, focusing on how she and the Department of Justice should go about that critical benchmarking function.

Can Voluntary Price Disclosures Fix the Payday Lending Market?
Jim Hawkins (March 28, 2016)
Eric J. Chang’s provocative article, www.PayDayLoans.gov: A Solution for Restoring Price-Competition to Short-Term Credit Loans—which, as its title suggests, proposes to facilitate price competition in the payday lending market by creating a federal online exchange for payday lenders to post lending rates—has sparked thoughtful reactions among consumer borrowing experts. This Response provides constructive criticism to Chang’s proposal, arguing that such an exchange is unlikely to meet its goal of restoring price competition and offering tweaks that would raise the likelihood of doing so.

King Henry II and the Global Financial Crisis
James W. Giddens (March 01, 2016)
A significant portion of the failure that fueled the 2008 financial crisis has been attributed to a systemic lapse in senior executive oversight at the major financial institutions. Notwithstanding this failure, these executives have not been held personal liable for their “King Henry moments,” instances where senior executives have allegedly been aware of, or turned a blind eye to, questionable acts that occurred on their watch—often for the executives’ own personal benefit. This Article outlines the current state of the law governing senior executive liability, summarizes recent headline events in the financial industry, and provides a series of recommendations for proportionate reforms to correct current incentive imbalances in the financial industry. 

The Role of Section 20(b) in Securities Litigation
William D. Roth (December 09, 2015)
In response to a 2011 Supreme Court ruling that restricted the use of Section 10(b) of the 1934 Act as a cause of action for fraud, SEC Chair Mary Jo White expressed in 2014 her agency’s intent to use Section 20(b) to litigate cases where Section 10(b) would no longer be viable. This Article assesses whether Section 20(b) can be an effective litigation tool for the SEC and private plaintiffs by dissecting the provision’s function and purpose, and by delving into its relevant legal doctrinal questions. 

The Swaps Pushout Rule: Much Ado About the Wrong Thing?
John Crawford and Tim Karpoff (December 07, 2015)
A notably bitter battle over financial reform in the wake of the crisis of 2008 has centered on the Swap Pushout Rule: a Dodd-Frank mandate that federally insured depository institutions—i.e., banks—refrain from entering into certain derivatives contracts. After several of the largest U.S. financial institutions successfully lobbied to roll back the Rule, the rollback inspired intense criticism, but the critiques have not accurately reflected what is really at stake for the banks or the public. While the Rule was sold as an anti-bailout measure, this Article argues that the Rule would have been ineffective as a means of preventing further bailouts of systematically important bank holding companies. The Article further argues that the primary reason systematically important bank holding companies care about the Rule is that it costs more to fund these swaps if they are booked at a different legal entity, such as a broker-dealer, rather than at a bank.

www.PayDayLoans.gov: A Solution for Restoring Price-Competition to Short-Term Credit Loans
Eric J. Chang (December 06, 2015)
Much of United States financial regulation has been predominantly based upon using mandated disclosure to facilitate price-competition. However, in the realm of payday lending, disclosure based regulation has received significant criticisms from regulators and consumer advocates. While federal action may be necessary to solve the payday lending problem, this Article argues that a movement towards stricter and more stifling regulations is an overreaction to the statement that disclosure is not working. Instead, this Article proposes a less burdensome but much more effective alternative: a federal online exchange for payday lenders to list and post lending rates.