April 17, 2015
Professor Lazaro commented on the Department of Labor’s proposed rule to extend a fiduciary standard to those providing investment advice to clients on retirement accounts in an article in On Wall Street, Tougher Rules But Flexible Comp Under New Fiduciary Proposal. The article, written by Andrew Welsch and Suleman Din, states:
Critics should remember that the DOL had initially come out with a fiduciary standard proposal in 2010, then pulled it and spent the next five years seeking additional comment and revising rules, said Christine Lazaro, director of the Securities Arbitration Clinic at St. John’s University School of Law.
“It’s not like they’ve moved forward quickly or haphazardly, or without considering viewpoints that they needed to,” Lazaro said. “They’ve moved forward carefully and I think thoughtfully in the process.”
The DoL proposal will be filed in the Federal register and will again be open for public comment, she added. “So there will be another opportunity for anyone to voice their concerns. The fact that they are moving forward faster than the SEC on a fiduciary standard doesn’t mean they haven’t given full consideration of viewpoints that they should be considering.”
Lazaro found little in the proposal for the industry to be alarmed about.
“It does seem like the general business models will be permitted,” Lazaro noted. “There really isn’t any need to panic. The major concerns raised by the industry regarding commissions and revenue sharing, these would be permitted to continue, so long as the advice given is in the best interest of the investor.”
“There are plenty of situations where advisors are already held to fiduciary duty, such as under state common law standards. It’s not like strict standards haven’t been tested and brokers haven’t been held to these standards already. It’s not a foreign concept when it comes to brokers.”
April 8, 2015
On March 25, PIABA released a report, entitled “Major Investor Losses Due to Conflicted Advice: Brokerage Industry Advertising Creates the Illusion of a Fiduciary Duty” co-authored by Joseph C. Peiffer and Christine Lazaro. The report compares the image brokerage firms project to the public in their advertising and on their websites with the position firms take in arbitration when it is alleged that they have breached their fiduciary duties to customers. Concurrent with the issuance of the report, PIABA held a news event during which Joe Peiffer and Professor Lazaro presented the report, and a customer shared her experience with one of the firms cited in the report. Professor Lazaro was quoted regarding the report in several stories, including Andrew Welsch, “Latest Fiduciary Rule Battle Cry: ‘Broker Ads Mislead Investors’,” On Wall Street, and James Langton, “U.S. brokerage firms misleading investors about fiduciary role: PIABA,” Investment Executive. Following the issuance of the report, Professor Lazaro traveled to Washington D.C. with other members of PIABA and met with a number of agencies and congressional staffers to discuss the fiduciary duty standard and other investor protection issues.
April 3, 2015
The Pittsburgh Post-Gazette has published Professor Jeff Sovern’s op-ed, Consumers often sign contracts they don’t read or understand. The op-ed, which drew on research reported in the the article Professor Sovern wrote with Professors Elayne Greenberg and Paul Kirgis, as well as the University’s Director of Institutional Assessment, Yuxiang Liu, ‘Whimsy Little Contracts’ with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, opens as follows:
Consumers often sign form contracts without reading them — if you don’t believe me, just drop by a car rental agency and watch what happens.
Consumers may have many reasons for not reading contracts, including that they are too long (the iTunes contract is 32 feet long when printed); that the contracts are incomprehensible (all that legalese); or that they can’t negotiate better terms.
March 31, 2015
John Q. Barrett
On March 11, 2015, Professor John Q. Barrett participated in an international conference entitled “Legally Blind: Law, Ethics, and the Third Reich,” held at Boston College in Chestnut Hill, MA. Professor Barrett’s lecture, “Dawning, Developing Comprehension of Nazi Law-Breaking & Atrocities: Justice Robert H. Jackson on the Road to Nuremberg, 1940-1945,” will be published in a conference book. During the conference, he and other conferees also were interviewed for a documentary film that now is in production. For local press on the conference, click here and here.
March 23, 2015
G. Ray Warner
Professor Ray Warner’s article Cross-Border Cooperation in the United States: A Retreat or Merely a Pause? appeared in a Festschrift delivered to leading international bankruptcy scholar Prof. Ian Fletcher in San Francisco on Friday. Prof. Fletcher is an Emeritus Professor of International Commercial Law at the University College of London and formerly was a Professor of Commercial Law and Head of the Insolvency Law Unit, Centre for Commercial Law Studies, Queen Mary and Westfield College, London University.
March 23, 2015
Professor Jeff Sovern’s article, Can Cost-Benefit Analysis Produce Better Consumer Protection? Or at Least Benefit Analysis? has been published at 4 UC Irvine Law Review 1241 (2014), as part of a symposium on cost-benefit analysis. Irvine, a relatively new law school, is ranked for the first time this year in the US News rankings, and came in at 30th. Here is the article’s abstract:
Cost-benefit analysis is often troubling to consumer advocates. But this article argues that in some circumstances it may help consumers. The article gives several examples of supposed consumer protections that have protected consumers poorly, if at all. It also argues that before adopting consumer protections, lawmakers should first attempt to determine whether the protections will work. The article suggests that because lawmakers are unlikely to adopt multiple solutions to the same problem, one cost of ineffective consumer protections is a kind of opportunity cost, in that ineffective consumer protections might appear to make unnecessary adoption of effective ones. Ironically, such an opportunity cost is unlikely to be taken account of in cost-benefit analysis. Among the protections that especially risk failing to benefit consumers are laws that require consumers to perform certain tasks, such as disclosure laws that presuppose consumers will pay attention to and act on the disclosures; if consumers instead generally ignore the disclosures, the consumer protection will be largely illusory. Accordingly, before adopting measures that depend on consumers to do something, lawmakers should try to verify that consumers will in fact undertake those actions. The article also makes some suggestions for ascertaining whether consumer protections will work — i.e., benefit consumers — and concludes with a brief critique of the proposed Independent Agency Regulatory Analysis Act.
March 11, 2015
The Consumer Financial Protection Bureau released a congressionally-mandated study of arbitration today and devoted two pages to discussing “Whimsy Little Contracts” with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, by Professors Jeff Sovern, Elayne E. Greenberg, Paul F. Kirgis, together with Yuxiang Liu. The St. John’s Arbitration Study was also mentioned in an American Bar Association publication, 21 Dispute Resolution Magazine, No. 2 at 2 (2015). In scholarly publications, the article is being cited at a rate of more than once for every month it has been available, as indicated by the following list of citations:
- Ann M. Lipton, Manufactured Consent: The Problem of Arbitration Clauses in Corporate Charters and Bylaws, Georgetown Law Journal n. 64 (Forthcoming) .
- Eyal Zamir and Yuval Farkash, Standard Form Contracts: Empirical Studies, Normative Implications, and the Fragmentation of Legal Scholarship, JERUSALEM REVIEW OF LEGAL STUDIES n. 142 (Forthcoming).
- Christopher P. Guzelian, Required Resolution: Enforcing Contracts Without Courts n. 26, Chapman NEXUS Law Journal (Forthcoming, 2015
- Jill I. Gross, Justice Scalia’s Hat Trick and the Supreme Court’s Flawed Understanding of Twenty-First Century Arbitration nn. 54, 141
February 19, 2015
Professor Jay Facciolo has just published “Do I Have a Bridge for You: Fiduciary Duties and Financial Advice,” his latest article on securities regulation, in 17 University of Pennsylvania Journal of Business Law 101 (2014). The issue of whether broker-dealers should be held to a fiduciary standard as are investment advisers has generated a great deal of debate since 2010, when Dodd-Frank mandated that the SEC study the issue. Currently, the Department of Labor is considering proposing a new rule that would apply a theoretically strict fiduciary standard to financial professionals in the ERISA context. Professor Facciolo’s article argues that a fiduciary standard is no substitute for substantively regulating conflicts of interest in the provision of financial advice. Fiduciary standards fail to provide strong legal protections because of the contractual nature of such standards. In addition, standards are only as strong as the enforcement mechanisms available and, in financial advice, regulatory oversight has been ineffective and there are no robust private rights of action. Finally, disclosure, the standard fall back in securities regulation, has not worked well in creating limitations on conflicts that protect investors. In fact, some recent research has even suggested that disclosure of conflicts of interest may make investors trust their conflicted investment advisers more. After all, only a trust worthy individual would be willing to disclose something potentially negative about herself.
February 10, 2015
Associate Academic Dean Larry Cunningham’s article, Appellate Review of Unpreserved Questions in Criminal Cases: An Attempt To Define the “Interest of Justice,” was recently cited by the Supreme Court of Alaska in Moreno v. State, 2015 WL 404251 (Alaska 2015), a decision clarifying the scope of plain error review in criminal cases in that jurisdiction. The article was previously cited favorably by the Supreme Court of Mississippi in Wilson v. State, 96 So.3d 721 (Miss. 2012), which quoted from Cunningham’s article in support of its decision. The article was published in the Journal of Appellate Practice and Process at volume 11, page 285. It articulates a framework by which appellate courts can analyze legal issues that are raised for the first time on appeal.
December 17, 2014
Professor Michael Perino had a column in Friday, December 12th’s New York Times titled, “The Gift of Inside Information,” which discusses and criticizes a recent decision of the United States Court of Appeals for the Second Circuit. A bit:
Insider trading is perhaps our most symbolic white-collar crime. Our ban on the practice expresses our deep social commitment to equality of opportunity; it embodies that peculiarly American revulsion for any special privileges that might be thought to accrue to the wealthy or to the political and social elite. As Preet Bharara, the United States attorney who spearheaded the most recent spate of prosecutions, explained, insider trading tells everybody “that everything is rigged and only people who have a billion dollars and have access to and are best friends with people who are on the boards of directors of major companies … can make a true buck.”
Allowing executives to give away information to whomever they choose so long as they get nothing in return simply makes no sense.