This course is available to 2L, 3L and LLM and other postgraduate students. Knowledge of corporations, accounting and finance is helpful but not essential.
Students will be graded on the quality of two papers to be produced during the semester and one multiple choice moderated final exam. Class participation will be recognized.
Students who complete the course will qualify for a JD minor writing credit (or, for LLMs, an LLM writing credit if they meet all the criteria for this degree requirement).
This course is an introduction to some of the international financial transactions frequently encountered in contemporary practice. The course moves from simple to complex transactions using as building blocks: syndicated lending transactions, securities offerings, and derivatives transactions. It examines the way in which particular transactions that originate in a national market (typically London or New York) evolve over time and are changed to accommodate the complexities of dealing cross-border. In doing so, the course considers the regulatory and economic conditions of the markets in which these transactions appear and the contents of typical transaction documents. The intent is to give students the opportunity to learn from exposure to commonly encountered transaction types and the regulatory and business environment in which these transactions are conducted.
We start with an introduction to the meaning of basic financial terms, the financial system and the regulatory framework within which the market participants (primarily banks and brokers) have been carrying out their activities. We will look at issues relating to capital adequacy, liquidity, counterparty risk and the financial condition of banks, which have been of particular relevance in the past few years, the problems that have arisen for banks and brokers, and the shape of regulatory responses in the US and EU, which will affect national and international markets for many years.
We then consider the development of cross-border syndicated bank lending by examining the evolution of the euro-market for bank lending and the provisions of the model loan agreement developed by the UK's Loan Market Association. We will look at how those loan agreements held up in the credit crisis and changes resulting both from the credit crisis and the regulatory response. After students become familiar with basic lending, we examine more complex lending transactions such as project financings.
The course examines securities offerings by studying the evolution of the euromarkets for debt securities and considers how these markets are affected by relevant aspects of US securities regulation and EU securities regulation. The compositions of documents for the offering and sale of debt securities are discussed along with disclosure rules, and due diligence considerations in the context of these transactions. We then go on to look at the offering and sale of equity securities. We also take a look at settlement systems in the context of international financial transactions, and legal opinions.
The course will introduce the concepts that underlie derivative transactions, and then study the economics underlying swap and option transactions and review some basic documentation developed by the International Swaps and Derivatives Association, Inc. We then study the evolution of synthetic financial products through credit default swaps and securitization transactions, including cash and synthetic securitizations, and other credit-linked products. We will also look at the impact of regulatory changes requiring clearing of derivatives transactions.
Students will become familiar with some of the more important international financial transactions that they are likely to encounter in practice, and the regulatory setting in which they are or may be carried out, will explore the impact of globalization on markets and will acquire a basic knowledge of the underlying concepts in the economics and documentation of these transactions. Because of the breadth of topics studied, depth on each particular topic in class is necessarily limited.
The course materials will be posted on Columbia's courseweb - there is no single course book. The course materials consist of slides and other reading materials. This course does require above average quantities of reading material. Important concepts will be introduced to the class in lecture format, but about five classes will also contain a case study or drafting exercise designed to illustrate the practical application of a particular topic. Class discussion of concepts and their practical application will be encouraged. Designated panels of students will be on call for each class other than the first one, and will be expected to have prepared in advance a question on the materials that they would like to have answered in class.
A small number of leading practitioners with specialist expertise will be invited to deliver guest lectures.