By: Frank Emmert Traditional fiat currencies managed by governments and central banks have had negative impacts on environmental, social, and governance (ESG) goals. Central banks in mature democracies pursue policies that prioritize economic growth and high employment. However, these policies often lead to inflation, eroding the savings and pension funds of average citizens and encouraging risky behavior by banks and entrepreneurs. The pursuit of endless growth is socially and environmentally unsustainable. Leaders in developing countries and dictatorships use expansive monetary policy to maintain their positions, further exacerbating the situation. Convertible fiat currencies moving across borders in untraceable transactions evade regulation and taxation, with trillions hidden in offshore tax havens. Virtual or crypto currencies on a blockchain can address these issues. Transactions on a public blockchain are transparent, traceable, and immutable, and monetary policy is controlled by algorithms, free from political influence. However, existing crypto currencies like Bitcoin and Ethereum have failed to align with ESG goals and have harmed the environment. They favor large capital holders and allow illicit money movements. Blockchain technology can be used differently, however. A virtual currency with strong governance, pegged to a currency basket, could be designed to build trust and appreciate in value, promoting
Category: Securities Law
Initial Coin Offerings: Innovation, Democratization, and the SEC
By: Jay Preston Initial coin offerings are a source of controversy in the world of startup fundraising, and their legality is, at best, an open question. Amid soaring valuations and rumors of looming SEC action, investors and issuers alike are scrambling to forge a path forward for the token-based startups of tomorrow. While issuers may soon be forced to comply with United States securities laws, the existing regime is inadequate because it does not allow startups to capture the unique benefits of coin sales and, more importantly, it does not allow eager American investors to take part in funding the world’s next generation of technology companies. Download Full Article (PDF) Cite: 16 Duke L. & Tech. Rev. 318
SEC Reporting Requirements for Publicly Traded Companies Should Not be Expanded Despite Advancements in Information Technology
By: Lindsey Kell Advancements in information technology allow information to be collected and analyzed quickly within a corporation. As a result, technology also allows the quicker release of information to the Securities Exchange Commission (SEC)—much quicker than the Form 10-K and Form 10-Q releases that are currently required for publicly traded companies. Although publicly traded companies must also disclose certain significant events in Form 8-K, the reporting requirements for publicly traded companies are not nearly as expansive as they could be considering the easy access these companies have to their business information. Even with this in mind, the SEC is well into a reevaluation of Regulation S-K primarily because requirements have accreted over time to become not just burdensome to companies but also blinding to investors who are overwhelmed by the volume of disclosure thrown at them. This paper expounds on these arguments and posits additional arguments for why the SEC should not expand reporting requirements for publicly traded companies. Specifically, expanded requirements are associated with high compliance costs; market forces already induce higher-quality disclosures; the more information companies file with the SEC, the more advantages they give to their competitors; and both the liability concerns and the doctrinal issues
The Frontiers of Peer-to-Peer Lending: Thinking About a New Regulatory Approach
By: William S. Warren The growth of online alternative lending presents several advantages for both those seeking credit and those with excess capital to lend. Over the past decade, several different models of peer-to-peer lending have emerged in the US and U.K. Each of these models has developed in response to the different regulatory system it faces, which has led to the models’ different risk and reward profiles. However, the current regulatory framework for regulating peer-to-peer lending, especially in the U.S., leaves much to be desired. The inadequate regulatory regime not only hampers the potential for growth and further innovation in the industry, but also creates risks for consumers, lenders, and, as the sector grows, entire markets. There is no clear or easy answer as to the optimal regulatory regime, but regulators should at least consider the basic functions of peer-to-peer lending and how to address risks with a more comprehensive and sensible model for regulation. Download Full Article (PDF) Cite: 14 Duke L. & Tech. Rev. 298
Informational Inequality: How High Frequency Traders Use Premier Access to Information to Prey on Institutional Investors
By: Jacob Adrian In recent months, Wall Street has been whipped into a frenzy following the March 31st release of Michael Lewis’ book “Flash Boys.” In the book, Lewis characterizes the stock market as being rigged, which has institutional investors and outside observers alike demanding some sort of SEC action. The vast majority of this criticism is aimed at high-frequency traders, who use complex computer algorithms to execute trades several times faster than the blink of an eye. One of the many complaints against high-frequency traders is over parasitic trading practices, such as front-running. Front-running, in the era of high-frequency trading, is best defined as using the knowledge of a large impending trade to take a favorable position in the market before that trade is executed. Put simply, these traders are able to jump in front of a trade before it can be completed. This Note explains how high-frequency traders are able to front-run trades using superior access to information, and examines several proposed SEC responses. Download Full Article (PDF) Cite: 14 Duke L. & Tech. Rev. 256