4 ms·

I think this is an insightful point. Lawyers are largely trained in reading and applying precedent. That said, one would think a responsible company would have

I think this is an insightful point. Lawyers are largely trained in reading and applying precedent. That said, one would think a responsible company would have received best and worst case guidance from a team of attorneys who could have easily expected this as a possible and perhaps probable outcome. In other words, "this hasn't been tested in court" doesn't excuse them from apparently not bothering to get an opinion from the regulators who have the potential to greatly embarrass them after a high-profile product launch.

Bartweiss 8y ago
Yes, this is precisely my confusion. I would have expected a good lawyer (of the sort a major fintech startup should employ) to say something more like: "This language doesn't directly violate the rules, and hasn't seen a court case. But it looks like an unsubtle attempt to bypass those rules and a big announcement using this approach is at minimum likely to draw some unfriendly scrutiny." The law isn't a computer, and regulators - especially in financial spaces - have substantially more freedom than courts to simply reject loopholes. Things like structuring rules are essentially "laws against circumventing the law" for exactly this reason. I'm pretty surprised that Robinhood either didn't get a warning about how poorly this could go, or chose to ignore it.
- dragonwriter 8y ago
  > The law isn't a computer, and regulators - especially in financial spaces - have substantially more freedom than courts to simply reject loopholes. Regulators have strictly less power than courts here when applying existing law and regulation, though they can write new regulations (but not law).
  - Bartweiss 8y ago
    > Regulators have strictly less power than courts here when applying existing... regulation I guess it's a matter of terminology, but I think there are at least some cases where this isn't true. Ex post facto legislation is permitted in civil law, but it's not something courts can generate in response to a case. Regulators operating under administrative law can create ex post facto rules wholesale if granted express permission by Congress, which is of course new regulation. But even without that grant, they can create limited retroactive rulings when new interpretations are offered during adjudication. [1] We can debate whether that's 'new regulation' or 'new interpretations of old regulation', but the net result is that regulators are empowered to cover unforeseen circumstances in ways that direct lawsuits are unlikely to offer. (I am not a lawyer, but...) a move like this looks like an invitation for a Chenery II action, if one is was even needed. The SIPC didn't want to issue brokerage-account protections for a "Checking & Savings Account", and whatever the SEC said to Robinhood produced a very swift change of tune. I suspect it was something like "if we go into adjudication and say magic ampersands don't change your issuing rights, every court in the country will back us up". [1] http://www.minnesotalawreview.org/wp-content/uploads/2013/02/Schmitter_MLR1.pdf http://www.minnesotalawreview.org/wp-content/uploads/2013/02...

Bartweiss 8y ago

Yes, this is precisely my confusion. I would have expected a good lawyer (of the sort a major fintech startup should employ) to say something more like: "This language doesn't directly violate the rules, and hasn't seen a court case. But it looks like an unsubtle attempt to bypass those rules and a big announcement using this approach is at minimum likely to draw some unfriendly scrutiny." The law isn't a computer, and regulators - especially in financial spaces - have substantially more freedom than courts to simply reject loopholes. Things like structuring rules are essentially "laws against circumventing the law" for exactly this reason. I'm pretty surprised that Robinhood either didn't get a warning about how poorly this could go, or chose to ignore it.

dragonwriter 8y ago
> The law isn't a computer, and regulators - especially in financial spaces - have substantially more freedom than courts to simply reject loopholes. Regulators have strictly less power than courts here when applying existing law and regulation, though they can write new regulations (but not law).
- Bartweiss 8y ago
  > Regulators have strictly less power than courts here when applying existing... regulation I guess it's a matter of terminology, but I think there are at least some cases where this isn't true. Ex post facto legislation is permitted in civil law, but it's not something courts can generate in response to a case. Regulators operating under administrative law can create ex post facto rules wholesale if granted express permission by Congress, which is of course new regulation. But even without that grant, they can create limited retroactive rulings when new interpretations are offered during adjudication. [1] We can debate whether that's 'new regulation' or 'new interpretations of old regulation', but the net result is that regulators are empowered to cover unforeseen circumstances in ways that direct lawsuits are unlikely to offer. (I am not a lawyer, but...) a move like this looks like an invitation for a Chenery II action, if one is was even needed. The SIPC didn't want to issue brokerage-account protections for a "Checking & Savings Account", and whatever the SEC said to Robinhood produced a very swift change of tune. I suspect it was something like "if we go into adjudication and say magic ampersands don't change your issuing rights, every court in the country will back us up". [1] http://www.minnesotalawreview.org/wp-content/uploads/2013/02/Schmitter_MLR1.pdf http://www.minnesotalawreview.org/wp-content/uploads/2013/02...