From Laggard to Leader: Updating the Securities Regulatory Framework to Better Meet the Needs of Investors and Society

The following is the executive summary of a just released report from the Global Financial Markets Center titled: “From Laggard to Leader: Updating the Securities Regulatory Framework to Better Meet the Needs of Investors and Society.” The full report can be accessed here. Climate change, systemic racism, and unprecedented income and wealth inequality pose direct […]

Democratizing of Free Markets’ Mission Failed

The democratization of finance is the self-proclaimed noble cause that Robinhood1 is pursuing by enabling commission-free investing for everyone. However, recent events revealed that the old saying “if it’s free, you are the product,“ has been successfully implemented in the retail investment world. In this article, we cover the recent GameStop fiasco, Robinhood’s business model, and what it means for a modern retail investor.  GameStop Fiasco  It all started with GameStop (NYSE: GME), a US video game retailer, […]

A Closer Look at Today’s U.S. Treasury Security Market

Since the introduction of Treasury Inflation Protected Securities (TIPS) in 1997, financial experts have used the quoted yield to maturity on these instruments to determine a “market-driven measure” of expected inflation. In particular, financial analysts have taken the quoted yield to maturity on a given conventional U.S. Treasury security and subtracted the quoted yield to […]

What should financial regulators do to ensure operational readiness for zero or negative interest rates?

Since the global financial crisis of 2007-2008, interest rates in many countries have reached historically low levels. Central Banks in some countries such as Sweden, Denmark, Japan and Switzerland, as well as the European Central Bank, have even resorted to negative or zero reference interest rates as a monetary policy tool, relying on the transmission mechanism of monetary policy to meet their policy objectives.   Negative or […]

Governance externalities from mandatory disclosure regulation

Supreme Court Justice Louis Brandeis famously proclaimed in 1914 that “sunlight is the best of disinfectants.” Today, scholars, policymakers, and regulators commonly hold a related belief that mandatory disclosures can improve markets’ transparency and effectiveness. Typically, these thinkers believe disclosure-based regulation is superior to rules-based alternatives (e.g., Dalley 2007; Etzioni, 2010). The advantage of a disclosure-based approach over […]

Climate Change Risk and the Costs of Mortgage Credit

A new challenge: pricing climate risks  In recent remarks, financial regulators across the globe have stressed the importance of understanding the effect of climate risks on the financial system. In a statement released on November 9, 2020, Governor Lael Brainard of the U.S. Federal Reserve stressed the importance of lenders’ abilities to identify and measure the risks posed by climate change. In particular, she emphasizes the importance of moving “from […]

Burning Down the House: How Inadequate Climate Risk Disclosures and Information Asymmetries Threaten to Disrupt the U.S. Mortgage Market

This post first appeared on the Climate Risk Disclosure Lab’s website.  The physical effects of climate change are wreaking havoc across the United States as extreme weather events are increasing in severity and frequency. The 2020 summer wildfires in the western U.S. broke “almost every record there is to break,” and there has been a notable […]

Regulatory Enforcement in OTC Markets

Regulatory enforcement in over-the-counter (OTC) markets presents a unique challenge. Enforcement efforts by the Securities and Exchange Commission (SEC) among exchange-listed companies are facilitated by companies’ provision of audited financial statements and other extensive disclosures. Sophisticated investors and financial intermediaries, such as analysts and credit rating agencies, supplement the SEC’s monitoring efforts by reviewing corporate […]

The Source(s) of Corporate Harm

How do corporations cause harm? Courts and legislatures have long subscribed to a simple, straightforward approach: “[T]he corporation touches the public only by the hands of [its] agents and servants.” In other words, according to the law, there is ultimately only one source of corporate harm: individual employees.   In a forthcoming article, I urge reconsideration of that centuries-old legal assumption. The law’s approach would surprise many non-lawyers […]

Scoping and Defining Financial Inclusion, Access to Credit, and Sustainable Finance

The World Bank, for example, defines financial inclusion as encompassing access to credit and sustainable finance. Other definitions of financial inclusion are circular or conclusory. Writers on sustainable finance also conflate the terms with the environmental, social, and governance (ESG) movement in corporate law or the United Nations’ Sustainable Development Goals. This symposium article scopes […]