Research Samples

Research Sample 1

'Security offerings are resorted to for capital raising such as capital expenditures and new investment projects. They are often used for refinancing purposes or when a firm needs to replace existing or maturing securities or to modify its capital structure.1 Additionally, security offerings become able to attract interest when the investor is in a position to exploit private information about the intrinsic value of securities or to make use of periods when financing costs are historically low.2 They are also used for financing of mergers and acquisitions purposes and for the facilitation of asset restructuring, such as spin-offs and carve-outs, improving the liquidity of existing securities, shifting wealth and risk bearing among classes of securities. Security offerings are the preferred choice when the objective is to create better conditions for the exercise of shareholders’ control (for example, voting and ownership), to strengthen the company’s takeover defences and to facilitate blockholder sales, as well as venturing into privatizations, demutualizations and reorganizations.

Securitization in itself performs a definite public policy purpose. For this reason, it has been utilised by the US Government in its home ownership policies (as it was believed that securitization bolsters the home ownership process).3 The big financial players (including institutions) like this tool too as they can attract a better income by simply sponsoring securitisation transactions.4 More importantly, however, resort to securitization enables financial institutions to reduce and manage their credit risk.5 Securitization combines the plus of having a diverse investment portfolio and the ability to obtain higher yields at low risk.6 While such a strategy seemed attractive in the bullish market prior to the financial crisis of 2008, this was no longer the case post 2008. The transition to a bearish market has aggravated the negative features present in this model.7

Security offerings come into operation when the owner of certain assets or the person authorised to deal with them (i.e. the sponsor) begins transferring the underlying assets to a securitisation special purpose entity (SSPE).This SSPE makes possible the issuance of different classes of securities in tranches to investors through an underwriter. Whether this operation will be successful depends on how a credit rating agency (CRA) has rated each tranche. Such rating reflects the creditworthiness of the underlying assets and the securitisation structure.8


Useful Definitions: Shelf Offerings

Known also under the name of shelf registration or shelf prospectus, shelf offerings are public offering where issuers could issue multiple offerings while using the same registration or prospectus.9 Securitizers are attracted to this because of the savings on costs and time attached to this regime. This is not the case with investors, who would be better served by more comprehensive asset-specific information provided to them on a tailor-made basis.

Shelf Issue is preferred by financially strong public companies. Universal shelf issue (a variant of the shelf issue) operates in a similar way, except that the issuers could choose to sell either debt or equity.10 The prospectus may be used to offer securities for up to several years after its publication.

Shelf offerings in the United States are defined as ‘a Securities and Exchange Commission (SEC) provision that allows an issuer to register a new issue security without selling the entire issue at once’.11 This means that an issuer can sell the issue in portions over a two-year period without re-registering the security or incurring penalties.12 In this context, shelf registration refers to a regulation which a corporation could evoke in order to comply with US SEC registration requirements for a new stock offering up to three years before doing the actual public offering.13 Note that this is not a basis for exemption of the corporation from filing the required annual and quarterly reports with the SEC.14 This rule is formally known as SEC Rule 415 of Regulation C, under the Securities Act 1933.15 Securities registered pursuant to Rule 415 may be sold concurrently in other transactions for which they have been registered.'16



1 B. EspenEckbo, Ronald W. Masulis, ØyvindNorli, ‘Security Offerings’, February 2007, , accessed on 25.07.2014.
2 Ibid.
3 Dan Awrey, ‘Complexity, Innovation and the Regulation of Modern Financial Markets’ (2011) Oxford Legal Studies Research Paper No. 49/2011,accessed on 21.07.2014, 42.
4 Ibid.
5 VittoriaCerasi and Jean-Charles Rochet, ‘Rethinking the Regulatory Treatment of Securitization’ (2011) Paolo Baffi Centre Research Paper No. 2008-21, 2, accessed on 27.07.2014.
6 Awrey (n 3), 42.
7 Hans von Reden, ‘Regulation of securitised products post the financial crisis’, (2013) UCL J.L. and J., 2(1), 112, 115.
8 David Ramos Muñoz ‘In praise of small things: securitization and governance structure’ (2010) 5(4) CMLR 363, 365.
9 Morrison and Foerster LLP, ‘Understanding Shelf Offerings’, 2013 accessed on 26.07.2014.
10 Eckbo (n 1), 144.
11 Investopedia, ‘Shelf Offering’, http://www.investopedia.com/terms/s/shelfoffering.asp, accessed on 22.07.2014.
12 Ibid.
13 Investopedia, ‘Shelf Registration’, http://www.investopedia.com/terms/s/shelfregistration.asp, accessed on 22.07.2014.
14 Ibid.
15 The Securities Act of 1933, https://www.sec.gov/about/laws/sa33.pdf, accessed on 15.07.2014.
16 SEC Division of Corporate Finance, ‘Manual of Publicly Available Telephone Interpretations; D. Rule 415’, https://www.sec.gov/interps/telephone/cftelinterps_rule415.pdf, accessed on 22.07.2014.

Research Sample 2

'4.1 Justification for Legislative Intervention and Identification of Issues

Measures which detect and deal with Sovereign default are crucial to the EU’s future response to a crisis; however, the EU cannot be numb to the reality that the sovereign debt crisis was precipitated by a failure in the international banking system. While the EU cannot regulate the international banking system, there are steps to be taken which can address weaknesses in the practice of banks operating within the Union. It has become apparent that the current regulatory structure has failed since it failed to avert the crisis in Europe’s banks. Some critics argue that the financial crisis was not only obviously caused by a regulatory failure but this was to be expected since the prevailing wisdom prior to 2008 was that markets do not fail and strict regulation is unnecessary.

The lack of regulation in the financial services field has lead to “perverse incentives” to take excessive risks for two reasons. First due to the separation of management and ownership and second, due to financial institutions which are “too big to fail” being safe in the knowledge that if their gambles pay off they reap the benefit, while if they do not, the government (that is to say, the taxpayer) will bail them out. The problem with the separation of ownership and management is that managers do not necessarily have the company’s long term interests at heart, since their incentives revolve around short term rewards - both in terms of financial bonuses for short term performance and re-election to their position. This problem is exacerbated in companies which use stock options as a form of remuneration as it encourages managers to take reckless risks in order to increase share price in the short term. The prevailing culture before the crisis is dubbed “American socialism” by Stiglitz - the concept that gains are personal and losses socialised. The Turner Review (a wide ranging review into UK and International Banking Regulation in light of the crisis conducted by the UK’s Financial Services Authority) concluded inter alia that ‘[t]here is a strong prima facie case that inappropriate incentive structures played a role in encouraging behaviour which contributed to the financial crisis.’ These considerations do not seek to focus on the issue of remuneration based perverse incentives, but to use this issue as a tool to demonstrate that since the incentives of those running banks are misaligned with those of the institutions, shareholders and even society, there is a strong case for robust regulation of the way they conduct business.

In some quarters there are concerns that regulators will use the crisis to overreact and introduce unnecessary regulation. This should not become an issue of light regulation versus heavy regulation. Rather it should be an issue of right regulation. In other words measures should be adopted which are sufficient to provide a framework which does not allow the financial services sector to endanger the wider economy again. The De Larosiere report states that, ‘it is extremely important to re-align compensation incentives with shareholder interests and long-term, firm wide profitability’. The report goes on to propose several methods of achieving this. Firstly, bonuses to those in control of investment portfolios should be given over a certain period of time-for example 5 years, in order to give managers an incentive to ensure long term prosperity. Currently, bonus pools being distributed annually is counterproductive as it ensures top managers will receive vast pay outs regardless of the consequences of the work they’ve done over that year. If their bonuses were paid out at the end of a 5 year cycle for example (or in instalments over those 5 years as the de Larosiere group proposes) then they would be a reward for proven good work and would furthermore incentivise them to ensure stable prosperity for their employers. These proposals are set out in Recommendation 11.As a side note, the incentives point works in a different way as well. In addition to regulating the incentives of managers, it is possible to regulate the incentives of shareholders-for example by increasing their exposure in case of bank failure. This would ensure that they have a greater interest to control management and prevent excessively risky behaviour. A detailed look into executive remuneration in the banking industry lies outside the scope of this chapter, however it is an issue which both shows the need for intervention in the sector generally and which must be kept in mind as a part of any long term reform package either at EU or Member State level.

The High Level Group on Financial Supervision in the EU, chaired by Jacques de Larosiere undertook a very detailed look into the financial crisis from a regulatory standpoint. In the final report (known as the Larosiere Report) the group offers a comprehensive analysis (some commentators have called the report “seminal”) of the factors which lead to the banking crisis (and therefore the Sovereign debt crisis) and propose a series of concrete steps which the EU needs to take in order to get to grips with the Eurozone crisis. Even at the outset the report notes that the EU had an inadequate crisis response framework in place.126 Also early on, the group addresses in passing a familiar point, that of greater coordination between regulators and monetary authorities (i.e. central banks, the ECB). ‘Overall cooperation between monetary and regulatory authorities will have to be strengthened, with a view to defining and implementing the policy mix that can best maintain a stable and balanced macro-economic framework.’

The above extract should be read along with the examples which the report gives of measures which could have been taken to avert the crisis, but were not (which appear above this passage in the report). Some of these measures make a point of regulation ensuring counter cyclical balance (making sure banks save up in good times so they can lend in a crisis) which is also a point made by Stiglitz.
Even more interestingly, one of the possibilities discussed is ‘modifying tax rules that excessively stimulate the demand for assets’. Read along with the main quote above, it would seem to show that the high level group is advocating not only co-operation between regulators and monetary authorities but also a certain level of convergence between fiscal and monetary policy (fiscal policy being concerned in part with taxation.) In relation to counter cyclical measures, the report discusses the Spanish approach-Spain’s central bank has engaged in a practice known as “dynamic provisioning”-in simplest terms this revolves around building up buffers for banks which they can draw on when loans start to go bad as they did during the financial crisis. Normal or “cyclical” operation means that banks have low lending criteria in boom times and conservative ones in a crisis-in other words they give away money more easily when times are good and do not build up buffers, while they try to build these buffers through conservative lending once a crisis has begun. The Spanish model works in reverse-it compels banks to build up buffers when times are good and lend more easily in a crisis. What this achieves is that banks already have a buffer when a crisis breaks. Furthermore, by sacrificing some potential gains during a successful period these provisions help manage crises, thus being better for stability. These arguments (among others) are summed up in the report’s recommendation 1 which proposes, inter alia, that minimum capital requirements should be increased, pro-cyclicality reduced (dynamic provisioning encouraged) and stricter rules should be introduced for off balance sheet items. Following on from that, the report’s Recommendation 7 deals with the “Parallel Banking System” - in other words off balance vehicles, hedge funds and other similar institutions. The group recommended that regulation should be extended (along with requirements for transparency) to all firms and entities the operation of which has a systemic effect.'

To view the complete, referenced, work, please visit: http://www.surrey.ac.uk/law/pdf/sslwp/Vol%2010.pdf

Research Sample 3

'Legal framework

Article 41 of the UN Charter compels implementing States to abide by the SC’s sanctions imposing resolutions.1 While Article 103 reiterates that obligations under the UN Charter take precedence over other international obligations of the concerned parties, it does not go as far as the corresponding League’s provisions2 in the sense that it implicitly allows for conflicting obligations to be put on hold, rather than to question their validity.3

Article 27 (Internal law and observance of treaties) of the Vienna Convention of the Law of the Treaties,4 reads: “A party may not invoke the provisions of its internal law as justification for its failure to perform a treaty.” Article 30(1) of the same treaty reiterates the importance of Article 103 of the UN Charter by stating that any conflict between incompatible treaties shall be subject to Article 103 and that in the case of clash between incompatible treaties, the earlier treaty prevails.5 The point of contention seems to be whether, “any other international agreement” in the context of Article 103 includes the EU or not.

For those subscribing to the inclusion theory, Kadi I showed disregard by the CJEU of the obligations of the EU Member States under the UN treaty.6 Such arguments gain support from the Lockerbie7 and Nicaragua judgments.8 Considering that the ICJ is the judicial organ of the UN, its stance on the matter was not unexpected. Yet, bias on behalf of the ICJ does not in principle justify placing another court above international law which is, arguably, what the CJEU attempted to do in Kadi I.9 To achieve this, the CJEU relied on the alleged primacy of Union law, primacy that has never been part of the founding treaties; rather, it has been asserted by the EU courts in their judgments.10 Haegemann established that an agreement concluded by the Community becomes part of Community law ranking between primary and secondary EU law.11 While this seems to be non-controversial, it becomes more problematic when at stakes are constitutional principles of the Community. In this respect, the courts’ approach underwent development, first opting to annul the offending Acts (but not the international agreement from which those Acts derived)12 and recently denying itself the possibility to invalidate an international agreement based on its own law.13

The general position with regard conflict of laws seems to point towards primacy of international over domestic law.14 At a second glance, however, the dynamic between domestic law and the Charter becomes enhanced by two separate trends. First, there are a number of self-imposed limitations working on the Charter’s efficiency-Article 24(2) requires the Council to act within the UN’s principles and purposes,15 which are outlined in its Articles 1 and 2 affording a considerable importance to Human Rights, Humanitarian, economic and social concerns alongside peace-maintaining considerations.16

Secondly, the possibilities of domestic challenge of the SC’s decisions seem reinforced by the developments in international law in the last 50 years and more specifically, the developments in the law of Human and Fundamental Rights.


The EU angle

In contrast to the UN SC’s political approach to this issue; the EU Courts’ decisions in respect of the discussed UN Resolutions offer a legalistic one. This dynamic is complemented by the specifically unique, supranational structure of the EU requiring the careful balancing of political and legal objectives. One of the leading EU objectives of late is to reaffirm and increase its international influence, status and economic power. Being accepted as a reliable partner in delivering the peace creating policies of the UN is one objective the EU has engaged in pursuing; this goes hand in hand with its long standing commitment to protection of the fundamental rights of the EU’s citizens.17 This is pursued against the backdrop of the interaction between the Community of Member States and the EU.18 In result, the adopted by the EU Courts approaches to UN related jurisprudence have been described as going from ‘subordination’ to ‘detachment’ and finally ‘harmonization’.'19



1 United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI, http://www.refworld.org/docid/3ae6b3930.html, accessed 19 August 2013 (UN Charter).
2 Article 20, Covenant of the League of Nations, 28 April 1919, http://www.refworld.org/docid/3dd8b9854.html, accessed 19 August 2013.
3 Debbas (n 13) 88.
4 (23 May 1969) 155 UNTS 331; 8 ILM 679 (1969); 63 AJIL 875 (1969), entered into force 27 January 1989
5 Ibid.
6 Aust, ‘Kadi: Ignoring International Legal Obligations’ [2009] 6 IOLR 293, 295.
7 Questions of Interpretation and Application of the 1971 Montreal Convention arising from the Aerial Incident at Lockerbie, Libyan Arab Jamahiriya v UK, Provisional measures, ICJ Rep[1992], para 7.
8 Military and Paramilitary Activities in and against Nicaragua [1984] ICJ Rep 392, 440. 9 Aust (n 4 ), 297.
10 Bjorn Kunoy and Anthony Dawes,’Plate Tectonics in Luxemburg: The ménage a trois between EC law, International Law and the European Convention on Human Rights following the UN sanction cases’ [2009] 46 CMLR 73,86.
11 Case 181/73, Haegemann v Belgium [1974] ECR 449, para 5.
12 Case 327/91 France v Commission [1994] ECR 3641 para 35.
13 Joined cases C-317/04 & C-318/04, Parliament v Council, [2006] ECR I-4721.
14 Vera Gowlland-Debbas,’Security Council Enforcement Action and issues of State Responsibility’ [1994] 43(1) ICLQ 55, 87.
15 Ibid, 91.
16 Nada (n 4) OIII-15, 658 Concurring opinion of judge Malinverni
17 James C. Hathaway, ‘E.U. Accountability to International Law: The Case of Assylum’ [2011] 33 Mich J IL 1.
18 Internationale Handelsgesellscha.fi v. Einfuhr und Vorratsstelle fur Getreide und Futtermittel.BVerfGE 37, 271 [1974] (Solange I) and re the application of WUnsche Handelsgesellschaft, .BVerfGE 73, 339 [1986] (Solange II).
19 Kushtrim Istrefi, ‘The Application of Article 103 of the United Nations Charter in the European Courts: The Quest for Regime Compatibility on Fundamental Rights’ [2012] 5(2) EJLS 81, 83.

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