Category Archives: Financial Regulation

Weidemaier: Dear NY Times: Thank You For Letting Me Sue Only 500 Miles From My Home

Over at Credit Slips, Mark Weidemaier has a nice post on the NY Times recent series on arbitration. From the text:

The attention on arbitration also seems a bit disproportionate, given the nearly-infinite ways that businesses use contracts to extract hidden value from employees and customers: incomprehensible warranty disclaimers, clauses limiting liability for damages, clauses requiring claimants to bring claims in remote and therefore expensive places, etc. Even if competition results in somewhat lower prices, that’s cold comfort for those on whom the costs fall most heavily. For all its high-mindedness, the NY Times is no different. Have a legal claim arising out of Times digital products? The Times graciously lets you file a lawsuit, but you’ll have to go to New York to do it, wherever you happen to live.*

I assume the NYT timed the series roughly to coincide with the Consumer Financial Protection Bureau’s anticipated decision to regulate the use of arbitration clauses in consumer financial contracts. One likely regulation would ban the use of class action waivers. For better or worse, private individual and class action lawsuits have come to occupy a significant place in the U.S. regulatory system. Yet the Supreme Court has gradually interpreted the Federal Arbitration Act to let businesses decide whether they want to participate in this system; many have opted out. This is an extraordinarily consequential development, and political actors should assume responsibility for deciding whether to embrace or reject it. So whatever the CFPB ultimately does, the decision will be noteworthy, and welcome, as one of the too-rare moments when politically-accountable actors finally take responsibility for deciding the limits of arbitration.

Read the whole thing here.

Share:Tweet about this on TwitterShare on FacebookDigg thisShare on RedditShare on StumbleUponEmail this to someone

Kweku Adoboli’s Future Career In Music Promotion?

I mentioned earlier Kweku Adoboli’s recent podcast interview with Lindsay Fortado of the FT, and listening to it has convinced me that, though his career as a trader may be over, perhaps he has a future in music promotion.

Let me explain.

Adoboli is the UBS rogue trader who was brought up on criminal charges in the UK stemming from unauthorized trading that first came to light in September 2011. He served about four years in prison and was recently released.

Adoboli was a trader on UBS’s four person ETF desk.  According to Adoboli, he began off-books trading in 2008 using an account nicknamed “umbrella,” which he used as a slush fund to hide profits until he needed them to cover a loss on some later, rainier, day.  As I’ve discussed, such smoothing of profits and losses is a common element in other recent rogue trading cases, including Jerome Kerviel at Société Générale.

As I said at the time:

The umbrella account is the one element of the case that has finally convinced me of the possibility of an Adoboli made-for-television movie (note to networks: I’m willing to consult on the cheap in exchange for hobnobbing with movie stars . . . or just for free lodging).  I think that we’re due for another rogue trading movie.  Though Nick Leeson got a real (not TV) movie out of his ordeal — starring Ewan McGregor, no less — it was a real dud, which hasn’t prevented me from showing it in class about a dozen times.

The umbrella account turned out to be an important element of Adoboli’s defense.  Adoboli’s lawyer, Charles Sherrard argued that all three ETF desk traders, including Adoboli’s supervisor, John Hughes, knew about the umbrella account.  Sherrard introduced numerous email and chat communications referencing Adoboli’s “umbrella,” “Rhianna,” and “ella ella,” in an attempt to establish that Adoboli, far from being a rogue agent, was part of a collaborative scheme in which other bank employees (again, including his direct supervisor) acquiesced.

Fortado asks Adoboli about the account in the podcast (“you had an internal fund that you created for the ETF desk, called the ‘umbrella’ or ‘Rihanna’ which was discussed at trial”) and Adoboli repeats his position that others (“many others”) at UBS knew about the trading scheme and either approved, directly participated, or turned a blind eye to it, because it was profitable.

Adoboli is the only rogue trader that ever gave me an excuse to show part of a Rihanna video at an international conference.

And now, he’s provided another music recommendation. At the end of the podcast, Fortado tells Adoboli that she knows he loves music and asks whether there is a song that is indicative of the way that he felt during the ordeal. His new theme song? Caught in the Hustle, by Immortal Technique:

So if I should ever fall and get caught in a hustle
Let them know that I died while I fought in a struggle
From the hoodrats to the rich kids lost in a bubble
Spray painting on the streets and at the subway tunnels
Write it down and remember that we never gave in
The mind of a child is where the revolution begins
So if the solution has never been to look in yourself
How is it that you expect to find it anywhere else

Well, there’s that then.

I have some thoughts on the interview itself, which I’ll try to return with, schedule permitting.

Related posts:

Kweku Adoboli Speaks!
Ella . . . Ella
AMV Seminario De Control Interno Y Compliance: Bogotá, Colombia
Kweku Adoboli Trial Began Today
The Rogue Trading KISS
When $61bn Seemed Like Real Money
Denial: It Ain’t Just A River In Egypt
It’s The Stupid Culture
It’s The Culture, Stupid
Kerviel’s Fake Trades: Genius Or Copy Cat?
Kerviel’s Fake Trades: The Anatomy of A Cover-Up
On Warning Signs II: Follow The Money
On Warning Signs: You Can’t Get There From Here
Rogues Versus Scapegoats
Kerviel Trial Opens to Fanfare
Société Générale: Back In The Saddle Again
Jérôme Kerviel to Société Générale: Stand By Your Man

Share:Tweet about this on TwitterShare on FacebookDigg thisShare on RedditShare on StumbleUponEmail this to someone

Kweku Adoboli Speaks!

f43adb48-4640-433e-884c-ee4e750195cd.imgWith Lindsay Fortado of the FT, that is.

Adoboli, who just finished a four-year prison term in connection with his loss of $2.3 billion through unauthorized trades while employed at UBS gives a podcast interview with the FT, in which he discusses his life, his work, his rogue trading, and subsequent trial.

The nine-week trial generated substantial public attention, and I blogged about it on a few occasions, which are linked below.

I’ll try to check back in with some thoughts about the interview, but for now, wanted to alert readers to the podcast.

http://podcast.ft.com/2015/10/22/the-crime-and-punishment-of-kweku-adoboli/

Related posts:

Ella . . . Ella

AMV Seminario De Control Interno Y Compliance: Bogotá, Colombia

Kweku Adoboli Trial Began Today

The Rogue Trading KISS

When $61bn Seemed Like Real Money

Denial: It Ain’t Just A River In Egypt

It’s The Stupid Culture

It’s The Culture, Stupid

Kerviel’s Fake Trades: Genius Or Copy Cat?

Kerviel’s Fake Trades: The Anatomy of A Cover-Up

On Warning Signs II: Follow The Money

On Warning Signs: You Can’t Get There From Here

Rogues Versus Scapegoats

Kerviel Trial Opens to Fanfare

Société Générale: Back In The Saddle Again

Jérôme Kerviel to Société Générale: Stand By Your Man

Share:Tweet about this on TwitterShare on FacebookDigg thisShare on RedditShare on StumbleUponEmail this to someone

Duke Law Students At FT Alphaville

Hooray for Duke Law Students Sriram Giridharan, Martin De Jong, Barret Jackson Nye, Brandon Rice, and Melinda Goralczyk, whose proposal to restructure Ukrainian debt is featured in depth over at FT Alphaville!!

As someone who has tried for years – unsuccessfully – to grab some attention from Alphaville’s savvy writers, I can say that this is quite a feat. Alphaville’s readership is highly sophisticated, especially on issues of sovereign debt, which are featured regularly, so this is a real vote of confidence for the students’ knowledge and creativity in coming up with this proposal.

I have it on good authority that this is a particularly exceptional group of students, so congratulations to them on a job well done, just as the semester is wrapping up.

Share:Tweet about this on TwitterShare on FacebookDigg thisShare on RedditShare on StumbleUponEmail this to someone

Slides From The Improving Risk Regulation Conference

Banner-OECD14-640x191As I mentioned in an earlier post, the OECD Regulatory Policy Division, together with the International Risk Governance Council (IRGC) and the Rethinking Regulation program at Duke University recently held a conference on Improving Risk Regulation: From Crisis Response To Learning and Innovation at the OECD Conference Centre in Paris. All of the slides from the conference, including mine, have now been posted online, and some of you may find some of the presentations useful.

Flyer_19JuneFrom the IRCG conference website:

New approaches to regulation may be stimulated by careful research and practical experience, but also spurred by crisis events that alter perceptions and spark demand for policy change.  What can we learn from these diverse sources of regulatory change? How can we do a better job in fostering constructive regulatory improvement?

The conference identified, evaluated and discussed the relevance and effectiveness of new approaches to improving risk governance, both as they result from responding to and learning from crises, and as deliberate innovations in how regulatory power is exercised and shared.  It built upon:

  • 577Work from the OECD Regulatory Policy Division about “Risk and Regulatory Policy – Improving the Governance of Risk” and recommendation about performance- and consumer-based regulation
  • The project on “Recalibrating Risk: Crises, Perceptions and Regulatory Change,” of the Rethinking Regulation program at Duke University, which investigates how regulatory policies and institutions change in response to crisis events, and seeks lessons for the future
  • IRGC’s work on the role of regulatory frameworks and institutional arrangements in the context of risk governance, including mechanisms for adaptive regulation that are able to update in response to new information and contexts.

10710629_957874910895532_1142226716549404503_nThe conference brought together practitioners of risk governance and regulation from private, public and academic organizations interested in sharing knowledge and enhancing their understanding of crisis and new forms of risk regulation.

To download slide presentations, go to the agenda and click on the respective presentation. For a short summary of each section, click on “Highlights” next to the session title.

Share:Tweet about this on TwitterShare on FacebookDigg thisShare on RedditShare on StumbleUponEmail this to someone

Meet Me In Paris!

Dear colleagues,

We invite you to attend the conference on “Improving Risk Regulation:  From Crisis Response to Learning and Innovation,” to be held in Paris on 13-14 October.

The latest conference agenda summary (version of 9 September) is accessible through the link at the bottom of this post.

The agenda, further details, and links to register are at:  http://www.irgc.org/event/annual-conference-2014/ .

This conference is co-hosted by the IRGC (www.irgc.org ), the OECD Regulatory Policy Division ( http://www.oecd.org/regreform/regulatory-policy/ ), and the Duke University “Rethinking Regulation” program (http://kenan.ethics.duke.edu/regulation/  ).

  • The first day addresses how crisis events shape regulatory change and how regulatory institutions can learn from crises.  This is the theme of a research project we are leading at Duke University on “Recalibrating Risk: Crises, Perceptions and Regulatory Change” (book forthcoming in 2015).
  • The second day addresses how regulatory systems can be designed to learn and improve over time, both exhibiting adaptive policy innovation and stimulating technological innovation.
  • Case studies to be highlighted during the conference include the regulation of oil spills, nuclear accidents, financial crashes, pharmaceuticals, and chemicals; the use of behavioral insights and non-government networks in regulation; and more.
  • Speakers will come from numerous countries, disciplines, and organizations.

 

We hope to see you there!

 

Best regards,

Ed Balleisen

Lori Bennear

Kim Krawiec

Jonathan Wiener

 

Duke University – “Rethinking Regulation” program http://kenan.ethics.duke.edu/regulation/

in collaboration with

IRGC, www.irgc.org

OECD Regulatory Policy Division,  http://www.oecd.org/regreform/regulatory-policy/

 

Improving Risk Regulation – Summary Agenda v09Sept2014

Share:Tweet about this on TwitterShare on FacebookDigg thisShare on RedditShare on StumbleUponEmail this to someone

Another HKU Summer, and Students As Colleagues

IMG_0716 IMG_0717 IMG_0679 IMG_0684 IMG_1800 IMG_1797As I mentioned in an earlier post, I was in China this summer on a variety of work-related activities, including attending a conference in Shanghai, visiting alumni in China and Taiwan, and teaching at the Duke-HKU Asia-America Institute in Transnational Law in Hong Kong. This was my second summer at the Institute, and I always have a great time there.

Hong Kong is such a wonderful city and HKU is, to my mind, a gorgeous urban campus, with harbor and peak views, koi ponds and other cool landscaping, easy access to the peak, and a fabulous new building with the latest classroom technology. This year, though, was especially fun because I was able to co-teach a mini-course on financial derivatives with one of my former financial derivatives students, Shinichi Yoshiya, now at Davis Polk’s Tokyo office. Shin was already an experienced lawyer, and particularly experienced with derivatives regulation, when he was a student at Duke, having worked at both Morgan Stanley and Deutsche Securities before coming to Duke for his LL.M. I did a post about a paper he did on central clearing when he was a student, here.

It was great to be back in one of my favorite cities and even better to be there teaching with one of my favorite (former) students!

Share:Tweet about this on TwitterShare on FacebookDigg thisShare on RedditShare on StumbleUponEmail this to someone