Brattle | Insights & Events | Broker-Dealers & Financial Services

Brattle Consultants Examine LIBOR Transition in US Markets and Economic Considerations for Potential Litigation in White Paper

Kim Brown — Mon, 17 Apr 2023 18:35:30 +0000

For decades, the London Interbank Offered Rate (LIBOR) was the ubiquitous benchmark rate used by lenders across financial markets to set rates on everything from derivatives to mortgages and business loans. However, LIBOR’s reputation came under fire during the financial crisis of 2008, and led to a search for alternatives. Publication of many LIBOR rates has already ended, and publication of the remaining five USD LIBOR tenors is scheduled to cease on June 30, 2023.

In a new white paper, Brattle Principal Ioannis Gkatzimas, Senior Associate Ryan Leary, and Research Analyst Musa Isani examine the transition away from USD LIBOR in the US market, detailing USD LIBOR’s downfall and the emergence of its recommended replacement, the Secured Overnight Financing Rate (SOFR). They also discuss a few market-based alternatives to SOFR, the initiatives and legislation designed to address challenges associated with the USD LIBOR transition, and the economic considerations for potential litigation that could arise related to the transition.

The full white paper, “From USD LIBOR to SOFR: A Look at LIBOR’s Exit, SOFR’s Ascendance, Emerging Alternatives, and Economic Considerations for Litigation,” is available below.

View White Paper

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American Finance Association Announces 2022 Recipients of The Brattle Group Prizes in Corporate Finance

Kim Brown — Tue, 17 Jan 2023 21:07:55 +0000

Each year, the Associate Editors of The Journal of Finance – published by the American Finance Association (AFA) – select three winners to receive The Brattle Group Prizes for outstanding papers in corporate finance. The Brattle Group supports this annual award to recognize the importance of excellence in providing groundbreaking analysis and debate on compelling issues facing the corporate finance community.

The winners of the 2022 Brattle Group Prize in Corporate Finance are:

First Prize, $25,000: Andreas Fuster, Paul Goldsmith-Pinkham, Tarun Ramadorai, and Ansgar Walther
Predictably Unequal? The Effects of Machine Learning on Credit Markets
The Journal of Finance, February 2022

Distinguished Paper, $10,000: Asaf Bernstein
Negative Home Equity and Household Labor Supply
The Journal of Finance, December 2021

Distinguished Paper, $10,000: Isaac Hacamo and Kristoph Kleiner
Forced Entrepreneurs
The Journal of Finance, February 2022

The Brattle Group has funded this annual award for more than 20 years. These prizes are presented at the AFA’s annual meeting, and this year’s awards were announced at the AFA’s Annual Meeting 2023, which took place January 6–8 in New Orleans, LA. All papers published in issues of The Journal of Finance from the first five issues of the given year, and December of the previous year, are eligible. We congratulate the winners on their achievements!

View a complete list of past winners

More about the AFA

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Brattle Congratulates Academic Advisor Dr. Michael Goldstein on Appointment as Secretary/Treasurer of the Financial Management Association

Kim Brown — Fri, 15 Apr 2022 15:10:15 +0000

We congratulate Brattle Academic Advisor Dr. Michael Goldstein on his appointment to Secretary/Treasurer at the Financial Management Association (FMA). He will start his new position on Saturday, April 16.

Dr. Goldstein will also continue in his capacity as Professor of Finance at Babson College, where he holds the Donald P. Babson Chair in Applied Investments. He specializes in examining the structure of equity and bond markets and does work in climate change, dividend policy, asset pricing, real estate, and privatization.

We wish Dr. Goldstein all the best in this new role.

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American Finance Association Announces 2021 Recipients of The Brattle Group Prize

Kim Brown — Tue, 18 Jan 2022 14:17:17 +0000

Each year, the associate editors of The Journal of Finance select three winners to receive the Brattle Group Prize for outstanding papers in corporate finance. The Brattle Group supports this yearly award in an effort to recognize the importance of excellence in providing groundbreaking analysis and debate on compelling issues facing the corporate finance community.

First Prize, $25,000: Peter M. DeMarzo and Zhiguo He
Leverage Dynamics without Commitment
The Journal of Finance, December 2020

Distinguished Paper, $10,000: Itamar Drechsler, Alexi Savov, and Philipp Schnabl
Banking on Deposits: Maturity Transformation without Interest Rate Risk
The Journal of Finance, February 2021

Distinguished Paper, $10,000: Pat Akey and Ian Appel
The Limits of Limited Liability: Evidence from Industrial Pollution
The Journal of Finance, February 2021

The Brattle Group has funded this yearly award for more than 20 years. These prizes are presented at the AFA’s annual meeting, and this year’s awards were announced at the virtual 2022 ASSA/American Finance Association’s (AFA) Annual Meeting on January 7–9. All papers published in the prior year’s issues of The Journal of Finance are eligible. We congratulate the winners on their achievement!

View a Complete List of Past Winners

More about the AFA

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Risk Management Expert and Former State Street Executive Joseph P. Belanger Joins The Brattle Group’s Finance Practice

brattle — Tue, 07 Dec 2021 21:52:27 +0000

The Brattle Group is pleased to announce that Mr. Joseph P. Belanger has joined the firm’s Cambridge office as a senior consultant, bringing a breadth of direct industry experience in the areas of credit, risk management, and fund administration to the firm’s finance practice. Mr. Belanger is a financial services executive with experience in creating and growing risk-based and hedge fund administration businesses, and implementing effective risk management programs. His portfolio of capabilities includes commercial lending, hedge funds and offshore funds administration, investment portfolio risk tools for traditional and hedge fund asset classes, trusteeship, and oversight of risk management and compliance programs. Mr. Belanger previously spent over 25 years at State Street Corporation, where he was part of the executive team in Alternative Investment Servicing. During that time, he spent 12 years as a senior vice president and division head with responsibility for the company’s credit services, Cayman offshore and alternative fund services, and global risk services business units. In this role, he had international oversight and risk management responsibilities for three business lines comprised of $20 billion in credit facilities, $118 billion of fund administration assets, and $1.6 trillion of assets serviced on risk analytics platforms. Earlier in his career, Mr. Belanger was also responsible for Investor Services Risk Management with oversight for the documentary, fiduciary, credit counterparty, operational, anti-money laundering/know your customer, and reputational risk exposures accompanying trustee, custody, and accounting services provided by State Street worldwide. Prior to joining Brattle, Mr. Belanger was an independent financial services consultant engaged in a number of litigations. He recently provided expert testimony in an investment services arbitration involving a failure to perform under a financing arrangement between partners in a joint venture agreement. He has also been engaged to provide expert advice in anticipation of testifying in disputes involving the standard of care due a hedge fund by its administrator.

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Brattle Senior Advisor Michael Goldstein Named Chair of FINRA

brattle — Tue, 07 Dec 2021 21:43:21 +0000

The Brattle Group congratulates senior advisor Michael Goldstein for his appointment as chair of the Financial Industry Regulatory Authority’s (FINRA) Economic Advisory Committee. Dr. Goldstein is a Professor of Finance and Faculty Director for The Stephen D. Cutler Center for Investments and Finance at Babson College, where he has been designated a Babson Faculty Scholar. He previously held the Joseph Winn Term Chair from 2000 to 2005. He has taught at Boston College and at the University of Colorado at Boulder, where he received the Proctor & Gamble Teaching Excellence Award. He also teaches several executive education courses to senior executives at major Fortune 100 firms and at financial, bio-pharma, and IT companies around the country. FINRA is the largest regulator for all securities firms doing business in the United States. Their mission is to protect America’s investors by making sure the securities industry operates fairly and honestly. FINRA has regulatory oversight over virtually every aspect of the securities business—from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. FINRA oversees nearly 4,525 brokerage firms, about 163,530 branch offices and approximately 631,085 registered securities representatives. Dr. Goldstein previously served as a member of the same Committee of FINRA. He has also previously served on the NASDAQ Economic Advisory Board from 2003 to 2005, and was elected Chair for 2005. From August 1997 to July 1998, he was the Visiting Economist at the New York Stock Exchange (NYSE), the eighth academic to hold this post. Prior to that, he advised the Deputy Prime Minister of Poland on Poland’s privatization program and worked as an Investment Banker with Merrill Lynch Capital Markets in their Financial Institutions and Japan Banking groups.

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How Might COVID-19 Affect the Financial Markets? Brattle Experts Share Insights

brattle — Mon, 21 Jun 2021 09:11:33 +0000

Brattle Principal Joseph Belanger, Associate Ryan Leary, and Senior Consultant Hollie Mason have authored an article for Wolters Kluwer’s Securities Regulation Daily and Banking and Finance Daily on the effect of COVID-19 on the financial markets. The COVID-19 pandemic has affected every aspect of the economy, and there have been many changes to regulatory focus and potential litigation concerns.

Market volatility and economic uncertainty – for instance, as COVID-19 has caused – are catalysts for increased regulatory scrutiny and securities litigation, as we saw in the 2008 global financial crisis. Already, market regulators have broadened their policing for fraudulent activity, and securities-related litigation filings are already on the rise. Broker-dealers and financial service firms should seek to mitigate the risk associated with the rapidly changing regulatory conditions. The firms that fail to anticipate and respond to these developments many find themselves unprepared for the risks and challenges associated with the current economic crisis.

The full article, “Broker-Dealers and Financial Services Firms Should Expect Increased Regulatory Scrutiny and Litigation in Light of COVID-19,” can be found on the Wolters Kluwer website.

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Brattle Client Wins Favorable Judgment Against Dually-Registered Broker-Dealer and Investment Adviser Accused of Defrauding Clients

brattle — Mon, 21 Jun 2021 09:11:32 +0000

In a December 2017 filing in a Connecticut federal court, the US Securities and Exchange Commission (SEC) sued Westport Capital Markets LLC and its owner, Christopher McClure, for defrauding the firm’s advisory clients.

The SEC alleged that the dually-registered broker-dealer and investment adviser bought discounted shares in securities offerings from investment banks that had underwritten these same shares. Westport Capital would then sell these shares to advisory client accounts at a higher price and keep the markup—2% to 3% of each share sold—for itself and hidden from clients. According to the SEC, these shares were risky and resulted in significant losses for clients.

The agency also alleged that the firm and its owner never disclosed that they were receiving thousands of dollars from 12b-1 fees, which had been charged directly to clients with Class A mutual fund shares in their portfolios. These charges led to tens of thousands of dollars of additional, undisclosed earnings for the fund and further losses for its clients.

The SEC retained Marti P. Murray, a principal at The Brattle Group, to opine on industry custom and practice for investment advisers, and to analyze certain aspects of Westport Capital’s transactions on behalf of advisory clients. Ms. Murray and the Brattle team, provided an expert report that evaluated the firm’s principal trades, the earnings that it received as a result of its mark-up on these trades, and its purchases of 12b-1 fee-paying share classes in mutual funds. Ms. Murray also testified on behalf of the SEC.

The federal court jury found in favor of the SEC on this matter, finding Westport Capital and its owner guilty of intentionally, knowingly, and recklessly defrauding its clients under the Advisor’s Act. This judgment builds on an earlier summary judgment that the firm failed to disclose its conflicts of interest and that it made unauthorized principal transactions.

Ms. Murray was supported in this matter by Associates Mohnish Zaveri and Julia Zhu, and Litigation Specialist Gara Paulson.

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