Title VII Dodd-Frank Derivatives Compliance
The course objective is to give the students an overview of Dodd-Frank's Title VII - Wall Street Transparency and Accountability ("Title VII"). Since Dodd-Frank represents the most comprehensive regulatory reform measures taken since The Great Depression, it impacts the financial market in a comprehensive and significant way. All U.S. financial transaction lawyers going forward will need to be intimately acquainted with Dodd-Frank, and starting with Title VII is a good place to start. Once the students have a handle on Title VII, the other Titles will be easier to digest.
No prior course pre-requisites apply to this class. All JD's and international LL.M. students are welcome to register.
The course will examine whether the drafters of Title VII understood the over-the-counter derivative products well enough to legislate the market properly, whether the rules issued by the federal agencies have been promulgated in the way that the legislators intended, and whether the provisions of Title VII have helped to stabilize the derivatives market.
One of the principles underlying this compliance class is that in order to truly understand how to regulate a financial product (and therefore know how to comply with the regulation), one must understand thoroughly the workings of the financial product as a starting point. This course will first start with an examination of the legal, market, and economic risks of three types of derivative instruments: (i) an interest rate swap, (ii) an option, and (iii) a CDS-on-ABS. The third instrument, CDS-on-ABS, has been alleged as having caused the financial crisis that started in 2007. We will examine in class whether this is the case.
In this course, the students will learn the legal, regulatory and risk management framework of the derivatives market before Title VII was implemented which will then be compared to the legal, regulatory and risk management issues that market participants face after Title VII was signed into law. Basically, how have the day-to-day operation and client-facing activities within a corporation, financial entities and investment banks been impacted due to the implementation of these rules. Before Title VII, one of the main focus of the industry was to customize the derivative products to meet the client's needs. The focus now is compliance with Title VII in the most cost-effective way. The class will include discussions on whether there is still room in the market for creativity in customizing derivative products.
The students will review the key derivative contracts that run the industry (such as the ISDA and CSA) and consider how the promulgated rules have impacted those contracts. The class will also cover the methods that the corporations, hedge funds, financial institutions and investment banks have undertaken to ensure compliance with Title VII.
Some cross-border matters (from the U.S. perspective) will be included in this class.
Equipped with the foundational knowledge regarding Title VII of Dodd-Frank, the course will conclude with each student addressing in a paper his or her thoughts on whether Title VII would have been able to prevent the economic crisis that began in 2007 if Title VII had been in place prior to 2007. The course grade will be determined by a combination of 20% class attendance and participation, 40% on the final paper, and 40% on the final exam.