TheExchange NEWS FROM THE FINANCIAL ECONOMICS INSTITUTE AT CLAREMONT MCKENNA COLLEGE CMC PRESIDENT VOLUME 2, SPRING 2006 Pamela Brooks Gann BOARD OF ADVISORS Boundaries of SEC Regulation Conference James B. McElwee ’74 (Chair) Weston Presidio February 3, 2006 William S. Broeksmit ’77 Consultant Stephen A. Burlingame ’99 ON FEBRUARY 3RD, THE FINANCIAL research. His work Trust Company of the West Economics Institute, in conjunction with focuses on ownership Brent R. Harris ’81 Claremont McKenna College and the Journal of structure, the cost of PIMCO Funds Corporate Finance, sponsored the conference on capital, valuation, Christopher J. Innes '92 the Boundaries of SEC Regulation. The event was financing, investment Banc of America Securities hosted at the Claremont Graduate University banking, and Gregg E. Ireland ’72 Capital Research and Management Company campus and was the first event of its kind for underwriting. During Perry A. Lerner ’65 the FEI. Academics, policymakers, and this session three papers Crown World Services practitioners gathered to discuss the law and were presented focusing Stephen T. McLin P’08 economics of financial market regulations, with on the various ways in STM Holdings, LLC particular emphasis on the SEC. The which the SEC has Jonathan Macey, Joseph H. Petrowski P’08 conference attracted over seventy attendees, affected companies in the Yale Law School Gulf Oil including accomplished professors, members of United States and Cody J Smith ’79 the SEC, and various analysts from top abroad. Specific topics included why firms go Goldman Sachs & Company investing firms. dark, the effects of the Sarbanes-Oxley Act, and Robert P. Thomas ’99 Cascade Investment The conference was divided into four legal penalties for financial misrepresentation. sessions; Regulatory Impact, Shareholder The second session on Shareholder ASSOCIATES Proposals and Shareholder Voting, Disclosure Proposals and Shareholder Voting was chaired Patrick S. Adams ’94 Regulation, and Mutual Fund Governance. by Bruce Johnsen, Professor of Law at the Scott A. Andron ’96 Robert Hansen, Francis Martin Chair in George Mason University School of Law. Winter Street Capital, LLC Business at Tulane University’s A.B. Freeman Johnsen is a former Senior Research Scholar Scott A. Ashby ’95 Morgan Stanley School of Business led the first session on and Financial Economist at the U.S. Securities Justin W. Braun ‘98 Regulatory Impact. Hansen’s work has and Exchange Commission’s Office of Barrington Associates published in several academic journals and he James B. Carroll ’77 has received many awards for his teaching and See Conference on page 2 LongRun Capital Management, LLC Philip Flynn ’79 Union Bank of California Russell Greenberg ’79 Altus Capital Partners In This Issue: Alan C. Heuberger ’96 Cascade Investment FinancialEconomics PAGE 2: Boundaries of SEC Regulation Susan Matteson King ‘85 INSTITUTE Conference continued Legg Mason Kevin M. Nutting ’97 PAGE 3: New York City Networking Trip Credit Suisse First Boston and Hedge Fund Day in LA Adam J. Prager ’01 Prager, Sealy & Co., LLC PAGES 4 & 5: Paul Books ’06 analyzes The Financial Economics Professors Brown, Helland, and Lowell E. Sears ’73 Sears Capital Management Smith’s research paper, “Corporate Institute fosters education and Philanthropic Practices” Joseph W. Vencil ’85 IXIS Securities North America research in financial economics by PAGE 5: Acknowledging FEI Student Robert C. Wetenhall ’94 Research Analysts Edge Asset Management, LLC offering a unique undergraduate PAGES 6 & 7: Emily Chou ’07 interviews DIRECTOR curricular program, the Financial FEI Board of Advisor Chair, James Janet Kiholm Smith McElwee ’74 ASSOCIATE DIRECTOR Economics Sequence, supporting PAGE 7: Financial Economics Speaker William O. Brown Series: John Paulos and Gary Smith state-of-the-art databases, and ASSISTANT DIRECTOR PAGE 8: Upcoming Events, Suggested Brian B. Dennis ’97 encouraging student-faculty Readings, and recognizing FEI ASSISTANT TO THE DIRECTORS Seniors Lori A. Buranek interaction on research. 2 THE FINANCIAL ECONOMICS INSTITUTE Conference from page 1 Boundaries of SEC Economic Analysis. The two papers presented information available to investors as a result of Regulation Conference during the second session focused on the role of regulation FD, and additional costs associated shareholder voting and how the Enron scandal with FD standards in businesses. Presenters has affected the level of involvement During the fourth and final session, shareholders play in corporations. Mutual Fund Governance was discussed. This • Jennifer Bethel Following the first two sessions, session was chaired by Babson College’s Erik Babson College conference participants gathered at the Marian Sirri, Professor of Finance. Sirri currently • Bernard Black Miner Cook Athenaeum at Claremont serves as the Governor of the Boston Stock University of Texas School of Law McKenna College for a luncheon and Exchange and is a regulatory board member of presentation. Keynote speaker, Jonathan R. the Boston Options Exchange. He served as the • Charles Collver Macey, the Sam Harris Professor of Corporate Chief Economist of the U.S. Securities and Nova Southeastern University Law, Corporate Finance, and Securities Law at Exchange Commission in Washington D.C. • James Cotter Yale Law School, presented a speech based on from 1996-1999. Three papers were presented Wake Forest University his paper entitled “Politicization and American that explored the causes and impact of mutual • Stephen Ferris University of Missouri-Columbia • Robert Hansen Tulane University • Larry Harris University of Southern California • Henry T.C. Hu University of Texas School of Law • Bruce Johnsen George Mason University School of Law • Jonathan Karpoff University of Washington • Camelia Kuhnen Stanford University • Kate Litvak Camelia Kuhnen James Cotter Stanford University Wake Forest University University of Texas School of Law • Jonathan R. Macey Yale Law School Corporate Governance.” Macey is an fund scandals, the make up of boards of established author whose work focuses on directors and how they influence mutual fund • Leonardo Madureira banking, capital markets, and corporate law and governance, and the effects of business Case Western Reserve University governance. He has served on the Legal connections between fund directors and the • Gerald S. Martin Advisory Committee of the NYSE Board of advisory firms that manage the funds. Texas A & M University Directors, and currently sits on the editorial Conference participants gathered at boards of the Journal of Banking and Finance and Scripps College for dinner and comments from • Nadia Massoud Journal of Financial Crime. Macey’s presentation Larry Harris, Professor of Finance and Business University of Alberta addressed the success of corporate governance Economics at the University of Southern • Meijun Qian institutions in the United States. Following his California, Marshall School of Business. His Boston College presentation, several conference participants research, teaching, and consulting projects discussed the effectiveness of SEC regulation primarily address trading and investment • Usha Rodrigues and its impact on corporate governance. management issues that arise in financial University of Georgia School of Law The afternoon began with Jennifer Bethel, markets. Harris served as the Chief Economist • Richard Schneible Jr. Associate Professor of Finance at Babson of the U.S. Securities and Exchange Texas Christian University College, chairing the third session on Commission from 2002-2004. The conference Disclosure Regulation. Bethel served as the came to an end with Harris providing closing • Erik Sirri Chief Economist for the Division of remarks that touched on the topics of the day, Babson College Corporation Finance at the U.S. Securities and and discussed his experiences as Chief • Mike Stegemoller Exchange Commission from 1996-1999. The Economist at the SEC. Texas Tech University session was comprised of four papers that The conference ended on a successful explored issues involving regulation Fair note, with many praises from the participants • Randall Thomas Disclosure. The papers addressed different ways regarding the conference, the topics covered, Vanderbilt University Law School that companies have been impacted by and the professional attitudes of Claremont • Sterling Yan regulation FD. Topics included the amount of McKenna students. L University of Missouri-Columbia CLAREMONT MCKENNA COLLEGE 3 New York City Networking Trip January 9-13, 2006 By Catherine Powers ’08, FEI Student Research Analyst IN EARLY JANUARY, THE FINANCIAL Economics Institute sponsored a trip that enabled sixteen students to participate in the third annual New York City Networking Trip. The trip was very successful - offering students an invaluable learning experience, insight into career opportunities in the financial services industry, and the opportunity to establish contacts with CMC alumni. During the trip, students visited with representatives from eight different firms: Altus Capital Partners, The Capital Group Companies, The Compass Group, Deloitte Consulting, Goldman Sachs, Kohlberg Kravis Roberts & Co., Lehman Brothers, and Morgan Back row, from left; Catherine Powers ’08, Donald Staglik ’08, Jerry Lin ’07, Daniel Jager ’08, Paul Stanley. Van Deventer ’07, William St. Clair ’07, Jason Brooks ’06, and Matthew Westcot ’06; Front row, from Upon their arrival in NYC, students left; Jacquelyn Bean ’07, Margaret