Adaptation dynamics of the quasispecies model

We study the adaptation dynamics of an initially maladapted population evolving via the elementary processes of mutation and selection. The evolution occurs on rugged fitness landscapes which are defined on the multi-dimensional genotypic space and have many local peaks separated by low fitness valleys. We mainly focus on the Eigen's model that describes the deterministic dynamics of an infinite number of self-replicating molecules. In the stationary state, for small mutation rates such a population forms a {\it quasispecies} which consists of the fittest genotype and its closely related mutants. The quasispecies dynamics on rugged fitness landscape follow a punctuated (or step-like) pattern in which a population jumps from a low fitness peak to a higher one, stays there for a considerable time before shifting the peak again and eventually reaches the global maximum of the fitness landscape. We calculate exactly several properties of this dynamical process within a simplified version of the quasispecies model.Comment: Proceedings of Statphys conference at IIT Guwahati, to be published in Praman

Stationary and dynamical properties of a zero range process on scale-free networks

We study the condensation phenomenon in a zero range process on scale-free networks. We show that the stationary state property depends only on the degree distribution of underlying networks. The model displays a stationary state phase transition between a condensed phase and an uncondensed phase, and the phase diagram is obtained analytically. As for the dynamical property, we find that the relaxation dynamics depends on the global structure of underlying networks. The relaxation time follows the power law $\tau \sim L^z$ with the network size $L$ in the condensed phase. The dynamic exponent $z$ is found to take a different value depending on whether underlying networks have a tree structure or not.Comment: 9 pages, 6 eps figures, accepted version in PR

Moving Beyond the Clamor for Hedge Fund Regulation : A Reconsideration of Client under the Investment Advisers Act of 1940

This Article argues that, from both theoretical and pragmatic perspectives, a better approach would be for law to regard private fund investors as clients of the managers of those funds for all purposes under the investment advisory regulatory regime. In making these arguments, it dissects the doctrinal and historical underpinnings and sources of the current doctrine--legislative history and case law, in particular, but also SEC interpretations and rule changes. In light of the policy considerations-- including investor protection--that gave rise to the Advisers Act, the growth of the investment advisory industry and private funds\u27 role in it, and lessons learned from recent turmoil in the financial markets, a doctrine that regards private fund investors as the clients of the funds\u27 managers is more coherent and better policy. Part II discusses the current regulatory regime governing investment advisers, including the exemption from investment adviser registration that many large fund managers have relied on to avoid SEC regulation, which considers each fund a single client. Reviewing prominent cases on investment adviser regulation and obligations, Part II also traces the origins of the doctrine that the person who is the direct recipient of an investment adviser\u27s services is to be regarded as the client of that adviser--which, in turn, has been employed to support the doctrine that a fund (rather than its investors) is the adviser\u27s client. Part III surveys some of the implications and incongruities arising from that doctrine, including the effective under-regulation of large investment advisers and augmentation of agency costs and other inefficiencies. It also discusses how recent and likely legislative changes are unlikely to remedy those deficiencies. Part IV discusses the misunderstanding of the adviser-client relationship and the misinterpretation of precedent evident in recent, prominent cases supporting the current doctrine. It further shows that current doctrine is contrary to--or at least gains no support from--the legislative history of the Advisers Act. Part V focuses on an alternative doctrine, one in which fund investors are deemed clients for purposes of investment advisers\u27 regulatory obligations. That Part posits both that this alternative doctrine alleviates incongruities in current regulation and that it is consistent with fiduciary principles

Institutionalization, Investment Adviser Regulation, and the Hedge Fund Problem

This Article contends that more effective regulation of investment advisers could be achieved by recognizing that the growth of hedge funds, private equity funds, and other private funds in recent decades is a manifestation of institutionalization in the investment advisory context. That is, investment advisers today commonly advise these “institutions,” which have supplanted other, smaller investors as advisory clients. However, the federal securities statute governing investment advisers, the Investment Advisers Act of 1940, does not address the role of private funds as institutions that now intermediate those smaller investors’ relationships to investment advisers. Consistent with that failure, investment adviser regulation regards a private fund, rather than the fund’s investors, as both the “client” of the fund’s adviser and the “thing” to which the adviser owes its obligations. The regulatory stance that the fund is the client, which recent financial regulatory reform did not change, renders the Advisers Act incoherent in its application to investment advisers managing private funds and, more importantly, thwarts the objective behind the Advisers Act: investor protection. This Article contends that policymakers’ focus should be trained primarily on the intermediated investors—those who place their capital in private funds—rather than on the funds themselves and proposes a new approach to investment adviser regulation. In particular, investment advisers to private funds should owe their regulatory obligations not only to the funds they manage but also to the investors in those funds

Investing and Pretending

This Article critically evaluates the CFTC\u27s “swap rules” and identifies the regulatory vision that they reflect. Based on that evaluation, it argues that the swap rules are grounded in a notable distinction between swaps and another financial market instrument--namely, securities. In particular, whereas “investing” is the hallmark of securities transactions, swap transactions fall under the rubric of “pretending,” a concept that this Article employs to elucidate the function and structure of swaps. Each party to a swap pretends that it holds either a long position or a short position in the reference asset, making payments to (or receiving payments from) the other party based on the performance of that position. Although the distinction between investing and pretending is vividly reflected in the CFTC\u27s approach to crafting the swap rules, this Article contends that the distinction is irrelevant for regulatory purposes. Moreover, the substantial regulatory costs arising from the CFTC\u27s pretense-based approach to swap regulation are likely to excessively hinder swap use, as firms seeking to mitigate risk turn to other types of hedging strategies in situations in which using swaps might otherwise be more socially beneficial. With the goal of efficient and coherent regulation in mind, this Article proposes that a substantially better approach to the CFTC\u27s swap rules would be to predicate them not on pretending, as the counterpoint to investing but, rather, on *1560 something that swap transactions and securities transactions have in common--and on which securities regulation, too, is based: the risks arising from speculation

The Modern Corporation Magnified: Managerial Accountability in Financial Services Holding Companies

This Article\u27s goal is to revisit early and thoughtful commentary on the fundamental problem of the large corporate enterprise--managerial accountability to shareholders-- to show that this fundamental problem is dramatically pronounced--magnified, if you will--in the types of enterprises that were at the center of the financial crisis, whether too big to fail or not. In particular, The Modern Corporation articulated that the evolution of economic organization has separated the beneficial ownership of property from those who control it and that this disjunction has created an irresolvable tension between shareholders and management. Nowhere is that tension more pronounced than in the context of FSHCs, raising questions regarding whether the standard tools of corporate governance are equipped to address it. This Article first recalls the primary contours of Adolf Berle and Gardiner Means\u27s acclaimed observations regarding the separation of ownership and control in the “modern corporation,” as well as their conclusions about the implications of those observations for the doctrine of shareholder primacy. Second, the Article describes how the activities of FSHCs generally differ from what we think corporations do and, certainly, from what Berle and Means conceived of as the purpose of corporations or, indeed, any business enterprise. In particular, rather than deploying physical property for the purpose of producing goods or providing services and, beyond that, creating economic value for the property\u27s ultimate owners, FSHCs deploy their and their customers\u27 and clients\u27 financial assets for the purpose of generating profits through trading and investment activities. Third, this Article articulates how those business activities render more acute the problem of the separation of ownership and control that Berle and Means observed. In particular, FSHC shareholders face additional peril as a result of managerial incentives that cultivate excessive risk-taking, which is often difficult to temper, and heavy regulation, which raises the prospect of both regulatory enforcement actions and regulatory capture--all fueled by rules under the Bankruptcy Code that, in the event of insolvency, limit a firm\u27s rights to recoup assets transferred in its final days. Additional risk derives from FSHCs\u27 relationships to their subsidiaries, which typically do carry on activities that fall within the more traditional role of corporate activity, such as performing broker-dealer or banking services. This discussion highlights that, because FSHCs are an evolved specimen of the modern corporation, there should be heightened concern regarding the possibility that FSHC managers may not be looking after shareholders\u27 best interests. Finally, this Article concludes that the special concerns that FSHCs produce both portend and necessitate rethinking the problem of managerial accountability in large, publicly traded corporations. The Article suggests, consistent with Berle and Means\u27s conclusions, that the notion of shareholder primacy should be supplanted--but does so without necessarily embracing the notion that corporations should be managed in the interests of innumerable constituencies. Rather, the Article raises the possibility that many of the concerns associated with FSHCs\u27 activities could be addressed through a greater governance focus on one constituency, in particular: those who seek out, and benefit from, FSHCs\u27 traditional and foundational business operations--namely, clients and customers

Temporary Securities Regulation

In times of crisis, including during the 2020–2021 global pandemic, the U.S. Securities and Exchange Commission (SEC) has engaged in a type of securities regulation that few scholars have acknowledged, let alone evaluated. Specifically, during recent market crises, the SEC adopted rules that are temporary, designed to help the securities markets and their participants— both public companies and public investment funds, such as mutual funds and ETFs—weather the crisis at hand but go no further. Once that goal has been accomplished, these rules usually expire, replaced by the permanent rules that they temporarily supplanted. Although the temporary-rulemaking endeavor is laudable—and arguably necessary for the sake of maintaining well-functioning markets in times of crisis—neither the SEC nor its observers have sufficiently acknowledged the meaningful risks that temporary rules might present to investors. At the same time, they have not appreciated the opportunities that temporary rules may create for furthering the cause of more effective regulation. This Article seeks to illuminate the potential and the pitfalls of temporary rules, thereby contributing to a better understanding of what is at stake when the SEC adopts them and what considerations should inform the agency’s rulemaking during future crises

Uncertain Futures in Evolving Financial Markets

Today\u27s publicly offered investment funds, including mutual funds, have ever more diverse investment strategies, as they increasingly invest in financial instruments that, in earlier years, had been the province of only the most sophisticated investors. Although the new landscape of investment possibilities may substantially benefit retail investors, one financial instrument attracting increasing amounts of retail investors\u27 assets is acutely troublesome: the commodity futures contract. Futures originated as a means for farmers and other producers of agricultural commodities to ensure that their products could be sold at reasonable prices. Early on, the goals of futures regulation centered on one particular risk facing futures market participants—manipulative trading that destabilizes futures markets--with little emphasis on other risks, including risks to futures traders\u27 assets. Over the years, that goal has remained largely static. As this Article argues, that is the problem. The many retail investors that now participate (indirectly) in the futures markets are at risk as a result of the inadequate regulation of futures commission merchants (“FCMs”), the brokerage firms that are essential for futures transactions. “Inadequate” regulation in this context, moreover, means inadequate procedural regulation— regulation aimed at protecting assets that a brokerage customer deposits with a broker for purposes of carrying out her trading activities. The weaknesses of the procedural regulation of FCMs are evident in rules governing both FCMs\u27 operations and the liquidation of insolvent FCMs. And the deficiencies are more than theoretical, having become all-too-evident in the wake of two recent FCM bankruptcies. Proposing tailored policymaking solutions, this Article further contends that futures regulation can become substantially more effective—and do so in a cost-effective manner that need not excessively disrupt existing regulatory approaches. These proposals would not only help protect retail investors as they navigate new investment options; they would also help fortify the promising role that futures trading has begun to play in twenty-first century financial markets

Institutionalization, Investment Adviser Regulation, and the Hedge Fund Problem

This Article contends that more effective regulation of investment advisers could be achieved by recognizing that the growth of hedge funds, private equity funds, and other private funds in recent decades is a manifestation of institutionalization in the investment advisory context. That is, investment advisers today commonly advise these “institutions,” which have supplanted other, smaller investors as advisory clients. However, the federal securities statute governing investment advisers, the Investment Advisers Act of 1940, does not address the role of private funds as institutions that now intermediate those smaller investors\u27 relationships to investment advisers. Consistent with that failure, investment adviser regulation regards a private fund, rather than the fund\u27s investors, as both the “client” of the fund\u27s adviser and the “thing” to which the adviser owes its obligations. The regulatory stance that the fund is the client, which recent financial regulatory reform did not change, renders the Advisers Act incoherent in its application to investment advisers managing private funds and, more importantly, thwarts the objective behind the Advisers Act: investor protection. This Article contends that policymakers\u27 focus should be trained primarily on the intermediated investors--those who place their capital in private funds--rather than on the funds themselves and proposes a new approach to investment adviser regulation. In particular, investment advisers to private funds should owe their regulatory obligations not only to the funds they manage but also to the investors in those funds