In the wake of the worst financial crisis since the Great Depression, calls for major reforms to the financial system have been agreed to globally at the G-20 level. The fear of dire economic consequences flowing from the failure of companies such as AIG and Lehman Brothers, which prompted unprecedented governmental actions in the USA, the UK and other countries in the EU, with trillions of dollars of taxpayer money put on the line to keep failing firms in business, was extremely unpopular. It became evident that there were major holes in the existing regulatory structure and there has been a global consensus that reform to the regulation of financial institutions, instruments and markets must and will occur. While there is a general consensus as to the necessity of immediate and extensive regulatory reform, there is a multitude of opinions as to what this reform would look like, and no coordination mechanisms in place to assume consistent implementation by national regulators.
In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted on July 21, 2010, is the most sweeping legislation affecting the US financial services industry since the Great Depression. Dodd-Frank?s extraterritorial reach is considerable and potentially troublesome. Although regulatory reform in the EU is in an earlier stage of development, there have been significant developments at both the commission and country levels. Although there is convergence on the issues reform measures must address, US and emerging EU legislation vary significantly in the approach they take to implementation.
This class will examine the effect of the financial crisis on the existing regulatory structures. We will look at the legislation and approaches that have been proposed in multiple jurisdictions and will also focus on the reforms that have been proposed by international organizations such as IOSCO, the IMF and the G20.
The class will cover the role and regulation of derivatives, asset-backed securities and other complex products that are viewed as key contributors to the financial crisis. It will also cover the effects of insolvency rules, the issues surrounding systemic risk regulations and the role of sovereign wealth funds, in the context of regulation of foreign direct investment. Underlying all of these discussions will be an examination of the global implications of national reform and the coordination of regulatory efforts across markets and jurisdictions.
The readings for the course will be primary materials- government and NGO reports, legislative proposals, academic and journalistic comment- addressing the key legislative and regulatory developments principally in the US and the EU and to a lesser extent in Asia.
Because we will be focusing on broad policy issues, and in light of the discussion of the existing regulatory structure in many of the reports we will be considering, it is not necessary that students have taken courses in corporate law or securities regulation to participate. Papers will be required on topics to be agreed, with an emphasis on a comparative approach. Additionally, there will be weekly one-page response papers based on the readings due at the start of each week. Class participation is encouraged and will be taken into consideration when assigning a grade. Any student with interest in the stimulating and exceptionally relevant subject matter is encouraged to enroll.