Seattle University School of Law
This Article is organized in three parts. Part One examines the nature of financial assets and their transition by market transactions from contracts to property. The discussion highlights the gray areas which financial assets occupy in decoupling, falling within both contract and property law.
Part Two describes four types of decoupled financial assets. The first type separates into two financial assets: ownership benefits and ownership risks. The presumed reduction of owners' risks prompted some academics to justify reducing the owners' protection. I suggest that attempts to protect owners from ownership risk have failed. Therefore, the suggestion was ill-conceived. The second type of decoupling separates into two financial assets: voting control and the ownership of financial assets. It creates "empty votes." This innovation can be abused in many different ways, as has been shown. The third type of decoupling is, in fact, coupling. It is called "reverse exchange securities." The fourth form of decoupling is process-based securitization. In fact, it may have been the first to appear publicly in the 1970s. It offers advantages, but excesses have created great disadvantages. Part Two concludes by noting that during the past thirty years, fundamental financial concepts and designs have been warped or eliminated. Therefore, we must reanalyze the new financial assets to discover whether the decoupling of these assets produces the results Berle and Means were concerned with.
Part Three poses a number of questions. First, does decoupling undermine the traditional property-type protections? Second, does decoupling warrant more regulation? Third, where is decoupling headed?7 Fourth, what regulation can we expect for current decouplings? And finally in this part, I argue that a radical regulatory view may be worth examining based on the principle that those who create benefits and risks for sale may not collect just part of the benefits. They should have "skin in the game" and bear a significant part of the risk as well; then, many of the problems that we reviewed might be ameliorated.
The New Financial Assets: Separating Ownership from Control
Seattle University Law Review
Available at: https://scholarship.law.bu.edu/faculty_scholarship/2998