Attorneys may not always consider whether their clients, and in fact all the parties, would be better off arbitrating their disputes rather than litigating them in traditional courts of law. Once traditional litigation has started, court deadlines approach. Then, no matter how long and drawn out the proceedings get, attorneys often do not take a step back and assess whether their matters might be better handled in arbitration. They would, however, be well served to think about whether traditional litigation is truly in their clients’ best interests.

Arbitration is an underused alternative to traditional courtroom litigation for commercial disputes that can be highly valuable for a number of reasons.

1. Arbitrations Are Generally Faster

In fact, arbitrations are generally far faster than traditional trials. Consider the 2017 study “Efficiency and Economic Benefits of Dispute Resolution through Arbitration Compared with U.S. District Court Proceedings,” by Roy Weinstein, Cullen Edes, Joe Hale, and Nels Pearsall of the economic research firm Micronomics. They found that U.S. district court cases took far longer to get to trial than cases decided by arbitration by the American Arbitration Association (the “AAA”). According to the study, “[t]hese differences are systematic across almost all states and sections of the country.”

The study found that, as compared to arbitrations through the AAA, which on average took under a year (11.6 months) to be fully resolved, federal district court cases took an average of a little over two years (24.2 months) just to get to trial, and federal court cases that underwent appellate review took an average of nearly three years (33.6 months) to conclude. Thus, lawyers who choose arbitration can generally expect to save their clients about a year of pretrial litigation. For cases that go through appellate review, they can expect to save their clients another ten months or so in appeals.

This study was undertaken of matters before the AAA on whose Commercial Disputes Panel I serve, in addition to handling arbitrations privately, upon direct retention by parties. I am not aware of an entity that would have more data about the length of arbitrations than the AAA, and the Micronomics’ team’s findings align with my experience. During the over thirty years I spent representing parties in litigation, I have never seen matters get to trial faster than I have seen them reach final hearings in arbitration.

2. Arbitrations Are Generally Less Costly

The longer cases drag on through the court system, the more expensive they become. The aforementioned Micronomics team calculated the economic impact of the parties not being able to use the resources that were dedicated to their disputes between 2011 and 2015. The team examined what it referred to as the “direct losses associated with additional time to trial,” i.e., the lost opportunity cost associated with litigating the cases in district courts rather than arbitrating them. These costs were estimated to total a stunning $10.9–13.6 billion, or more than $180 million per month, and that was just for federal court cases that were not appealed. For federal court cases that were appealed during this time period, the estimated direct losses associated with the additional time required were higher: a staggering $20.0–22.9 billion, or more than $330 million per month.

The data included in the Micronomics study ended in 2015. The costs saved from arbitrating cases are probably even greater today. Law firms, particularly large firms, have generally been implementing substantial increases in their billing rates. According to a Wolters Kluwer report on late 2024 billing data reviewed in the Law360 article “Attorney Billing Rates Continue To Climb In 2024,” the average billing rates for litigation partners at law firms with over 750 attorneys exceeded $1,122 per hour in 2024, while the average rates for associates reached $726 per hour. Partner rates in such law firms rose by 7.5 percent and associate rates by 10.8 percent, and these rates are projected to continue rising. Moreover, the trend of increasing attorney rates is not limited to large law firms. According to LawVision’s 2024 Strategic Pricing Survey, approximately 60 percent of respondent law firms raised rates by 6 percent or more in 2024, with the trend expected to continue in 2025.

While skilled commercial litigation lawyers may charge the same rates for handling arbitrations as handling traditional litigation, higher rates impact the cost differential between the two, since arbitrations generally take so much less time. As reported by the United States Courts in “The Need for Additional Judgeships: Litigants Suffer When Cases Linger”:

Nationally, the average time between filing a [federal court] civil case and trial is a little over two years. In many of these overworked courts, the average time between filing and trial is much longer, often three to four years. The delays increase costs for civil litigants, who have to spend more on attorneys’ fees, expert witnesses, and depositions, often with no clear end in sight.

3. Discovery Is Generally Far More Streamlined

In traditional courtroom litigation, it is common for parties in commercial cases to get mired in discovery disputes. It is not uncommon for there to be so many discovery disputes that a special master / court-appointed neutral must be appointed.

In arbitrations, in contrast, discovery is limited. The parties seeking discovery must request it. The arbitrator will normally hold a conference, speak with the parties about their discovery needs, and, based on what they hear, restrict discovery accordingly. In arbitrations, special masters may be appointed, but that is rare. When they are appointed, it is most often to determine whether the arbitrators should see certain documents or whether the documents have been properly marked as privileged.

4. The Parties May Seek Privacy

In courts of law, the public and press generally have the right to access the proceedings. Some companies have been embroiled in commercial litigation disputes that garnered nightmarish media attention. Such coverage can harm their operations, reputation, revenues, and even viability.

Arbitration proceedings, in contrast to court proceedings, are generally not open to the public. Arbitrations are generally private, and the parties can seek to use arbitration rules that require confidentiality to ensure it. Thus, another benefit of arbitrating commercial disputes is that the parties can keep sensitive information shared in the proceedings confidential.

5. Arbitrators Can Be Far More Flexible

While it is rare to find a commercial litigation lawyer who has not received a notice scheduling a court conference on an inconvenient date, arbitration offers the parties greater scheduling control. For instance, in traditional litigation, the initial case conference is generally set by an autogenerated scheduling order. The parties are rarely consulted before it is issued. In arbitrations, in contrast, the parties generally get the chance to confer and propose the conference dates.

Likewise, in traditional courts of law, case deadlines are generally issued with little to no party input. That is not the case with arbitrations. In arbitrations, before deadlines are set, the parties can typically confer and propose the deadlines they would like. The parties may even propose the final hearing dates. This is not the case in traditional courts of law, in which trial dates are set by the court, often with the parties having little to no real opportunity to check their witnesses’ schedules. Courts of law can also put parties into trial pools in which they are on call for trial upon short, even twenty-four-hour, notice.

Arbitration’s additional flexibility goes beyond choosing deadlines and dates. In arbitration proceedings, the parties may propose whether there will be pre-hearing briefs and if so, how long they may be. The parties may also propose such things as how many witnesses may be deposed and how long the depositions may be.

In traditional courts of law, trials take place in the courthouse in which the matter is being litigated. In arbitrations, the parties can choose where the final hearings will be held. In arbitrations, unlike traditional court proceedings, the parties may also propose their desired trial schedule. They may have their final hearing days start earlier than 9 a.m., go past 5 p.m., have specified breaks during the day, and/or have scheduled days off in between. There are countless ways in which arbitrators can offer the parties flexibility that is unheard of in traditional litigation.

6. The Parties Can Choose Their Judges

Another advantage to choosing to arbitrate commercial disputes is the ability to select the decision-makers, the arbitrators. In particular, the parties may select arbitrators with a deep understanding of the issues in their dispute.

Commercial disputes may be quite complex. For example, a case with a breach of contract claim by a law firm seeking to recover legal fees and counterclaims by its former client-company for legal malpractice may seem straightforward. However, the underlying case could involve claims and counterclaims worth millions of dollars, and extensive fact and expert witness discovery. There could be complex issues of fact and law to mull over to decide the dispute.

If such a case is arbitrated, the parties may select arbitrators with experience deciding fee and legal malpractice disputes. They may select arbitrators with experience in the area of law at issue in the parties’ underlying dispute. Whatever the claims, in an arbitration, the parties may select the arbitrators who have the very experience they seek.

In traditional courts of law, that is not the case. The judge is selected for the parties in federal court, often by a random drawing or rotation in order. The judge may have little to no experience with the issues in the case.

7. Arbitration Offers Immediate Finality

In traditional litigation, if a case goes to trial, after the jury or judge in a non-jury case issues the verdict, the verdict is not initially binding. There is a time period during which the losing side can appeal the decision, and appeals can take years to resolve.

In arbitrations, the parties get finality with virtually no risk of appellate review. After the final hearing, the arbitrator makes their final decision, the arbitration award, and it is immediately binding. With limited exceptions (such as for fraud or corruption), arbitration awards generally may not be vacated or overturned. Thus, once the award is issued, it becomes final, and after the losing party’s time to satisfy the award has passed, the parties can enforce it and move on.

8. Arbitrating Cases Lessens Court Congestion

According to the Administrative Office of the U.S. Courts’ report Federal Judicial Caseload Statistics 2024, the number of civil cases filed in U.S. district courts has risen from 281,608 in 2015 to 347,991 in 2024. That represents an increase of approximately 23.6 percent, meaning that the number of cases filed between 2015 and 2024 has risen by nearly a quarter. Over the same nine-year period, the number of cases pending has risen from 340,925 to 633,066, an increase of 85.69 percent, or over three-quarters.

Our courts are clogged. The reason arbitrations are generally far quicker than traditional litigation is in large part because of that congestion. When attorneys choose to arbitrate cases, rather than litigating them, they remove cases from our courts’ overcrowded dockets and help minimize the amount of disputes our courts have to manage.

Conclusion

Attorneys would be wise to consider whether their clients and adversaries might be better off arbitrating their commercial disputes. Doing so can generally save them over a year in litigation and thousands of dollars per case. They can avoid protracted discovery and the risk of having their internal business affairs made public. They can offer the scheduling and final hearing dates they wish, as well as select arbitrators with the very experience they want. When their arbitration awards are issued, there is little to no chance they will be subject to review, and arbitrating their cases helps minimize court congestion.

Editors

§ 8.1. Introduction

Trial lawyers eagerly anticipate the day they begin opening statements in the courtroom and get to take their client’s matter to trial. With a trial comes a lot of hard work, preparation, and navigation of the civil rules and local rules of the jurisdiction. This chapter provides a general overview of issues that a lawyer will face in a courtroom, either civil or criminal. The authors have selected cases of note from the present United States Supreme Court docket, the federal Circuit Courts of Appeals, and selected federal District Courts that provide a general overview, raise unique issues, expand or provide particularly instructive explanations or rationales, or are likely to be of interest to a broad cross section of the bar. It is imperative, however, that prior to starting trial, the rules of the applicable jurisdiction are reviewed.

§ 8.2. Pretrial Matters

§ 8.2.1. Pretrial Conference and Pretrial Order

Virtually all courts require a pretrial conference at least several weeks before the start of trial. A pretrial conference requires careful preparation because it sets the tone for the trial itself. There are no uniform rules across all courts, so practitioners must be fully familiar with those that affect the particular courtroom they are in and the specific judge before whom they will appear.

According to Federal Rule of Civil Procedure 16, the main purpose of a pretrial conference is for the court to establish control over the proceedings such that neither party can achieve significant delay or engage in wasteful pretrial activities.^[1] An additional goal is facilitating settlement before trial commencement.^[2]

Federal Rule of Civil Procedure 16 also contemplates a Final Pretrial Conference to formulate a “trial plan.”^[3] A proposed pretrial conference order should be submitted to the court for review at the conference. Once the judge accepts the pre-trial conference order, the order will supersede all pleadings in the case.^[4] The final pretrial conference order is separate from pretrial disclosures, which include all information and documents required to be disclosed under Federal Rule of Civil Procedure 26.^[5] Many federal courts, pursuant to their local rules, are requiring more detailed pretrial submissions, requiring the parties to outline all legal issues and defenses, and lawyers must pay careful attention to these submissions as some judges do not allow parties to introduce arguments outside the four corners of their pre-trial submission.

§ 8.2.2. Motions in Limine

A motion in limine, which means “at the threshold,”^[6] is a pre-trial motion for a preliminary decision on an objection or offer of proof. Motions in limine are important because they ensure that the jury is not exposed to unfairly prejudicial, confusing, or irrelevant evidence, even if doing so limits a party’s defenses.^[7] Thus, a motion in limine is designed to narrow the evidentiary issues for trial and to eliminate unnecessary trial interruptions by excluding the document before it is entered into evidence.^[8]

In ruling on a motion in limine, the trial judge has discretion to either rule on the motion definitively or postpone a ruling until trial.^[9] Alternatively, the trial judge may make a tentative or qualified ruling.^[10] While definitive rulings do not require a renewed offer of proof at trial,^[11] a tentative or qualified ruling might well require an offer of evidence at trial to preserve the issue on appeal.^[12] A trial court’s discretion in ruling on a motion in limine extends not only to the substantive evidentiary ruling, but also the threshold question of whether a motion in limine presents an evidentiary issue that is appropriate for ruling in advance of trial.^[13] Where the court reserves its ruling on a motion in limine at the outset of trial and later grants the motion, counsel should remember to move to strike any testimony that was provided prior to the ruling.

Motions in limine are not favored and many courts consider it a better practice to deal with questions as to the admissibility of evidence as they arise at trial.^[14]

§ 8.3. Opening Statements

One of the most important components of any trial is the opening statement—it can set the roadmap for the jury of how they can find in favor of your client. The purpose of an opening statement is to:

acquaint the jury with the nature of the case they have been selected to consider, advise them briefly regarding the testimony which it is expected will be introduced to establish the issues involved, and generally give them an understanding of the case from the viewpoint of counsel making a statement, so that they will be better able to comprehend the case as the trial proceeds.^[15]

It is important that any opening statement has a theme or presents the central theory of your case. As a general rule, a lawyer presents facts and evidence, and not argument, during opening statements. Being argumentative and introducing statements that are not evidence can be grounds for a mistrial.^[16] It is also important that counsel keep in mind any rulings on motions in limine prohibiting the use of certain evidence. Failure to raise an objection to matters subject to a motion in limine or other prejudicial arguments can result in the waiver of those rights on appeal.^[17] And the “golden rule” for opening statements is that the jurors should not be asked to place themselves in the position of the party to the case.^[18]

Defense counsel may decide to reserve their opening until their case in chief—this is a strategic decision and is typically disfavored in jury trials.

§ 8.4. Selection of Jury

§ 8.4.1.  Right to Fair and Impartial Jury

The right to a fair and impartial jury is an important part of the American legal system. The right originates in the Sixth Amendment, which grants all criminal defendants the right to an impartial jury.^[19] However, today, this foundational right applies in both criminal and civil cases.^[20] This is because the Seventh Amendment preserves “the right of trial by jury” in civil cases, and an inherent part of the right to trial by jury is that the jury must be impartial.^[21] Additionally, Congress cemented this right when it passed legislation requiring “that federal juries in both civil and criminal cases be ‘selected at random from a fair cross section of the community in the district or division where the court convenes.’”^[22]

Examples of ways that jurors may not be impartial include: predispositions about the proper outcome of a case,^[23] financial interests in the outcome of a case,^[24] general biases against the race or gender of a party,^[25] or general biases for or against certain punishments to be imposed.^[26]

Over the years, impartiality has become more and more difficult to achieve. This is due mainly to citizens’ (potential jurors) readily available access to news, and the news media’s increased publicity of defendants and trials.^[27] In Harris, the Ninth Circuit analyzed whether pre‑trial publicity of a murder trial biased prospective jurors and prejudiced the defendant’s ability to receive a fair trial.^[28] The court recognized that “[p]rejudice is presumed when the record demonstrates that the community where the trial was held was saturated with prejudicial and inflammatory media publicity about the crime.”^[29] However, the court found that despite immense publicity prior to trial, because the publicity was not inflammatory but rather factual, there was no evidence of prejudice in the case.^[30]

§ 8.4.2. Right to Trial by Jury

All criminal defendants are entitled to a trial by jury and must waive this right if they elect a bench trial instead.^[31] However, a criminal defendant does not have a constitutional right to a bench trial if he or she decides to waive the right to trial by jury.^[32] In civil cases, the party must expressly demand a jury trial. Failure to make such a demand constitutes a waiver by that party of a trial by jury.^[33] For example, in Hopkins, the Eleventh Circuit explained that a plaintiff waived his right to trial by jury in an employment discrimination case when he made no demand for a jury trial in his Complaint and did not file a separate demand for jury trial within 14 days after filing his complaint.^[34] Some jurisdictions require payment of jury fees to reserve the right to a jury trial.

Additionally, not all civil cases are entitled to a trial by jury. First, the Seventh Amendment expressly requires that the amount in controversy exceed $20.^[35] Additionally, only those civil cases involving legal, rather than equitable, issues are entitled to the right of trial by jury.^[36] Equitable issues often arise in employment discrimination cases where the plaintiff seeks backpay or another sort of compensation under the ADA, ERISA, or FMLA.^[37] Where there are both legal and equitable claims, the parties should address how trial will proceed at the pre-trial conference and whether the equitable claims will be submitted to the jury on an advisory basis, or otherwise.

Another issue that arises in civil cases is contractual jury trial waivers. Most circuits permit parties to waive the right to a jury trial through prior contractual agreement.^[38] Generally, the party seeking enforcement of the waiver “must show that consent to the waiver was both voluntary and informed.”^[39]

§ 8.4.3. Voir Dire

Voir dire is a process of questioning prospective jurors by the judge and/or attorneys who remove jurors who are biased, prejudiced, or otherwise unfit to serve on the jury.^[40] The Supreme Court has explained that “voir dire examination serves the dual purposes of enabling the court to select an impartial jury and assisting counsel in exercising peremptory challenges.”^[41]

Generally, an oath should be administered to prospective jurors before they are asked questions during voir dire.^[42] “While the administration of an oath is not necessary, it is a formality that tends to impress upon the jurors the gravity with which the court views its admonition and is also reassuring to the litigants.”^[43] Moreover, jurors under oath are presumed to have faithfully performed their official duties.^[44]

Federal trial judges have great discretion in deciding what questions are asked to prospective jurors during voir dire.^[45] District judges may permit the parties’ lawyers to conduct voir dire, or the court may conduct the jurors’ examination itself.^[46] Although trial attorneys often prefer to conduct voir dire themselves, many judges believe that counsel’s involvement “results in undue expenditure of time in the jury selection process,” and that “the district court is the most efficient and effective way to assure an impartial jury and evenhanded administration of justice.”^[47]

“[I]f the court conducts the examination it must either permit the parties or their attorneys to supplement the examination by such further inquiry as the court deems proper or itself submit to the prospective jurors such additional questions of the parties or their attorneys as the court deems proper.”^[48] However, a judge still has much leeway in determining what questions an attorney may ask.^[49] For example, in Lawes, a firearm possession case, the Second Circuit found that it was proper for a trial judge to refuse to ask jurors questions about their attitudes towards police.^[50] If, on appeal, a party challenges a judge’s ruling from voir dire, the party must demonstrate that trial judge’s decision constituted an abuse of discretion.^[51] Thus, it is extremely difficult to win an appeal regarding voir dire questioning.^[52] It is also important to keep in mind that cases involving sensitive issues, like sexual abuse type cases, that the lawyer may need to conduct individual voir dire, outside the presence of others, to protect the individuals answering difficult questions on the public record or in front of other potential jurors. This is another issue that should be addressed at the pre-trial conference.

§ 8.4.4. Jury Selection Methods

Each court has its own procedures for jury selection. The two basic methods are the struck jury method and the jury box method (also known as strike-and-replace). At a high level, the methods differ with respect to how many prospective jurors are subject to voir dire and the order in which jurors can be challenged or struck from the jury panel. For example, the jury box method seats the exact number of jurors in the jury box needed to form a viable jury, and allows voir dire and challenges to those jurors. The stuck method allows voir dire of a larger number of prospective jurors, usually the number of jurors needed to form a viable jury, plus enough prospective jurors to cover all preemptory challenges and potential alternates. Counsel should review local and judge rules to determine which method will be applied, and if you anticipate a multi-week trial. Where there is no set rule or judicial preference, counsel may stipulate with opposing counsel as to the method.

§ 8.4.5. Challenge for Cause

A challenge “for cause” is a request to dismiss a prospective juror because the juror is unqualified to serve, or because of demonstrated bias, an inability to follow the law, or if the juror is unable to perform the duties of a juror. 18 U.S.C. § 1865 sets forth juror qualifications and lists five reasons a judge may strike a juror: (1) if the juror is not a citizen of the United States at least 18 years old, who has resided within the judicial district at least one year; (2) is unable to read, write, or understand English enough to fill out the juror qualification form; (3) is unable to speak English; (4) is incapable, by reason of mental or physical infirmity, to render jury service; or (5) has a criminal charge pending against him, or has been convicted of a state or federal crime punishable by imprisonment for more than one year.^[53]

In addition to striking a juror for these reasons, an attorney may also request to strike a juror “for cause” under 28 U.S.C. § 1866(c)(2) “on the ground that such person may be unable to render impartial jury service or that his service as a juror would be likely to disrupt the proceedings.”^[54]

A challenge “for cause” is proper where the court finds the juror has a bias that is so strong as to interfere with his or her ability to properly consider evidence or follow the law.^[55] Bias can be shown either by the juror’s own admission of bias or by proof of specific facts that show the juror has such a close connection to the parties, or the facts at trial, that bias can be presumed. The following cases illustrate examples of challenges for cause:

• U.S. v. Price: The Fifth Circuit explained that prior jury service during the same term of court is not by itself sufficient to support a challenge for cause. A juror may only be dismissed for cause because of prior service if it can be shown by specific evidence that the juror has been biased by the prior service.^[56]
• Chestnut v. Ford Motor Co.: The Fourth Circuit held that the failure to sustain a challenge to a juror owning 100 shares of stock in defendant Ford Motor Company (worth about $5000) was reversible error.^[57]
• United States v. Chapdelaine: The First Circuit found that it was permissible for trial court not to exclude for cause jurors who had read a newspaper that indicated co‑defendants had pled guilty before trial.^[58]
• Leibstein v. LaFarge N. Am., Inc.: Prospective juror’s alleged failure to disclose during voir dire that he had once been defendant in civil case did not constitute misconduct sufficient to warrant new trial in products liability action.^[59]
• Cravens v. Smith: The Eighth Circuit found that the district court did not abuse its discretion in striking a juror for cause based on that juror’s “strong responses regarding his disfavor of insurance companies.”^[60]

§ 8.4.6. Peremptory Challenge

In addition to challenges for cause, each party also has a right to peremptory challenges.^[61] A peremptory challenge permits parties to strike a prospective juror without stating a reason or cause.^[62] “In civil cases, each party shall be entitled to three peremptory challenges. Several defendants or several plaintiffs may be considered as a single party for the purposes of making challenges, or the court may allow additional peremptory challenges and permit them to be exercised separately or jointly.”^[63]

Parties can move for additional peremptory challenges.^[64] This is common in cases where there are multiple defendants. For example, in Stephens, two civil codefendants moved for additional peremptory challenges so that each defendant could have three challenges (totaling six peremptory challenges for the defense).^[65] In deciding whether to grant the defendants’ motion, the court recognized that trial judges have great discretion in awarding additional peremptory challenges, and that additional challenges may be especially warranted when co-defendants have asserted claims against each other.^[66] The court in Stephens ultimately granted the defendants’ motion for additional challenges.^[67]

Parties may not use peremptory challenges to exclude jurors on the basis of their race, gender, or national origin.^[68] Although “[a]n individual does not have a right to sit on any particular petit jury, . . . he or she does possess the right not to be excluded from one on account of race.”^[69] When one party asserts that another’s peremptory challenges seek to exclude jurors on inappropriate grounds under Batson, the party challenged must demonstrate a legitimate explanation for its strikes, after which the challenging party has the burden to show that the legitimate explanation was pre-textual.^[70] The ultimate determination of the propriety of a challenge is within the discretion of the trial court, and appellate courts review Batson challenges under harmless error analysis.^[71]

Finally, some courts have found that it is reversible error for a trial judge to require an attorney to use peremptory challenges when the juror should have been excused for cause. “The district court is compelled to excuse a potential juror when bias is discovered during voir dire, as the failure to do so may require the litigant to exhaust peremptory challenges on persons who should have been excused for cause. This result, of course, extinguishes the very purpose behind the right to exercise peremptory challenges.”^[72] However, courts also acknowledge that an appeal is not the best way to deal with biased jurors. The Eighth Circuit recognized that “challenges for cause and rulings upon them . . . are fast paced, made on the spot and under pressure. Counsel. as well as the court, in that setting, must be prepared to decide, often between shades of gray, by the minute.”^[73]

§ 8.5. Examination of Witnesses

§ 8.5.1. Direct Examination

Direct examination is the first questioning of a witness in a case by the party on whose behalf the witness has been called to testify.^[74] Pursuant to Fed. R. Evid. 611(c), leading questions, i.e., those suggesting the answer, are not permitted on direct examination unless necessary to develop the witness’s testimony.^[75] Leading questions are permitted as “necessary to develop testimony” in the following circumstances:

• To establish undisputed preliminary or inconsequential matters.^[76]
• If the witness is hostile or unwilling.^[77]
• If the witness is a child, or an adult with communication problems due to a mental or physical disability.^[78]
• If the witness’s recollection is exhausted.^[79]
• If the witness is being impeached by the party calling him or her.^[80]
• If the witness is frightened, nervous, or upset while testifying.^[81]
• If the witness is unresponsive or shows a lack of understanding.^[82]

Additionally, it is improper for a lawyer to bolster the credibility of a witness during direct examination by evidence of specific instances of conduct or otherwise.^[83] Bolstering occurs either when (1) a lawyer suggests that the witness’s testimony is corroborated by evidence known to the lawyer, but not the jury,^[84] or (2) when a lawyer asks a witness a question about specific instances of truthfulness or honesty to establish credibility.^[85] For instance, in Raysor, the Second Circuit found that it was improper for a witness to bolster herself on direct examination by testifying about her religion or faithful marriage.^[86]

When a party calls an adverse party, or someone associated with an adverse party, the attorney has more leeway during direct examination. This is because adverse parties may be predisposed against the party direct-examining him. Because of this, the attorney may ask leading questions, and impeach or contradict the adverse witness.^[87] Courts have broadened who they consider to be “associated with” or “identified with” an adverse party. Employees, significant others, and informants have all constituted adverse parties for purposes of direct examination.^[88] Further, even if the witness is not adverse, an attorney may also ask leading questions to a witness who is hostile. In order to ask such leading questions, the direct examiner must demonstrate that the witness will be resistant to suggestion. This often involves first asking the witness non-leading questions in order to show that the witness is biased against the direct examiner.^[89]

When a witness cannot recall a fact or event, the lawyer is permitted to help refresh that witness’s memory.^[90] The lawyer may do so by providing the witness with an item to help the witness recall the fact or event. Proper foundation before such refreshment requires that:

the witness’s recollection to be exhausted, and that the time, place and person to whom the statement was given be identified. When the court is satisfied that the memorandum on its face reflects the witness’s statement or one the witness acknowledges, and in his discretion the court is further satisfied that it may be of help in refreshing the person’s memory, the witness should be allowed to refer to the document.^[91]

However, the item/memorandum does not come into evidence.^[92] In Rush, the Sixth Circuit found that although the trial judge properly permitted defense counsel to refresh a witness’s memory with the transcript of a previously recorded statement, the trial judge erred in allowing another witness to read that transcript aloud to the jury.^[93]

Further, sometimes the party calling a witness wishes to impeach that witness. Generally, courts are hesitant to permit parties to impeach their own witnesses because the party who calls a witness is vouching for the trustworthiness of that witness, and allowing impeachment may confuse the jury or be unfairly prejudicial.^[94] Prior to adoption of the Federal Rules of Evidence, a party could impeach its own witness only when the witness’s testimony both surprised and affirmatively damaged the calling party.^[95]

However, Federal Rule of Evidence 607 states that “the credibility of a witness may be attacked by any party, including the party calling the witness.”^[96] The Advisory Committee Notes of Rule 607 indicate that this rule repudiates the surprise and injury requirement from common law.^[97] A party can impeach a witness through prior inconsistent statements, cross-examination, or prior evidence from other sources.^[98] However, a party may not use Rule 607 to introduce otherwise inadmissible evidence to the jury.^[99] Additionally, a party may not call a witness with the sole purpose of impeaching him.^[100] Further, even courts that do not permit a party to impeach its own witness still permit parties to contradict their own witnesses through another part of that witness’s testimony.^[101]

§ 8.5.2. Cross-Examination

Cross-examination provides the opposing party an opportunity to challenge what a witness said on direct examination, discredit the witness’s truthfulness, and bring out any other testimony that may be favorable to the opposing party’s case.^[102] Generally under the federal rules, cross-examination is limited to the “subject matter” of the direct examination and any matters affecting the credibility of the witness.^[103] The purpose of limiting the scope of cross-examination is to promote regularity and logic in jury trials, and ensure that each party has the opportunity to present its case in chief. However, courts tend to liberally construe what falls within the “subject matter” of direct examination.^[104] For example, in Perez-Solis, the Fifth Circuit found that a witness’s brief reference to collecting money from a friend permitted opposing counsel to cross-examine him on all of his finances.^[105] Additionally, the language of Fed. R. Evid. 611(b) states that although cross-examination “should not” go beyond the scope of direct examination, the court may exercise its discretion to “allow inquiry into additional matters as if on direct examination.”^[106] However, if the questioning goes beyond the subject matter, it generally should not include leading questions.

One of the main goals of cross-examination is impeachment. The Federal Rules of Evidence explain three different methods of impeachment: (1) impeachment by prior bad acts or character for untruthfulness,^[107] (2) impeachment by prior conviction of a qualifying crime,^[108] and (3) impeachment by prior inconsistent statement.^[109] Additionally, courts still apply common law principles and permit impeachment through three additional methods as well: (1) impeachment by demonstrating the witness’s bias, prejudice, or interest in the litigation or in testifying, (2) impeachment by demonstrating the witness’s incapacity to accurately perceive the facts, and (3) impeachment by showing contradictory evidence to the witness’s testimony in court.^[110] The following present case examples of each of the six methods of impeachment:

1. Prior bad act or dishonesty: In O’Connor v. Venore Transp. Co.,^[111] the First Circuit found that trial judge did not abuse discretion when he allowed defense counsel to cross-examine plaintiff with his prior tax returns with the purpose of demonstrating dishonesty.
2. Conviction of qualifying crime: In Smith v. Tidewater Marine Towing, Inc.,^[112] the Fifth Circuit found that, in Jones Act action arising from injuries plaintiff received while working on a tugboat, defense counsel permissibly crossed the plaintiff about his prior convictions.
3. Prior inconsistent statement: In Wilson v. Bradlees of New England, Inc.,^[113] a product liability case, the First Circuit found that defense counsel appropriately crossed plaintiff with an inconsistent statement made in a complaint filed in a different case against a different defendant.
4. Bias or prejudice: In Udemba v. Nicoli,^[114] the First Circuit found that it was permissible for defense counsel to cross-examine the plaintiff’s wife about domestic abuse to show bias in a case involving excessive force claims against the police.
5. Incapacity to accurately perceive: In Hargrave v. McKee,^[115] the Sixth Circuit found that the trial court should have permitted defense counsel to question a victim about how her ongoing psychiatric problems affected her perception and memory of events.
6. Contradictory evidence: In Barrera v. E. R. DuPont De Nemours and Co., Inc.,^[116] the Fifth Circuit held, in a personal-injury action, that the trial judge erred in denying the use of evidence showing that plaintiff received over $1000 per month in social security benefits because the evidence was admissible to contradict defendant’s volunteered testimony on cross-examination that he did not have a “penny in his pocket.”

Once the right of cross-examination has been fully and fairly exercised, it is within the trial court’s discretion as to whether further cross-examination should be allowed.^[117] In order to recall a witness, the party must show that the new cross-examination will shed additional light on the issues being tried or impeach the witness. Further, it is helpful if the party seeking recall demonstrates that it came into possession of additional evidence or information that it did not have when it previously crossed that witness.^[118] Further, it is difficult to succeed on an appeal of a trial court’s failure to permit recall for further cross‑examination. This is because courts review a trial judge’s decision for abuse of discretion, and often find that the lack of recall was a harmless error.^[119]

§ 8.5.3. Expert Witnesses

Experts are witnesses who offer opinion testimony on an aspect of the case that requires specialized knowledge or experience. Experts also include persons who do not testify, but who advise attorneys on a technical or specialized area to better help them prepare their cases. A few key criteria should be considered at the outset when choosing an expert. First is the level of relevant expertise and the ability to have the expert’s research, assumptions, methodologies, and practices stand up to the scrutiny of cross-examination. Many law firms, nonprofits, commercial services, and government agencies maintain lists of experts categorized by the expertise; those lists are a helpful place to begin. Alternatively, counsel may begin by researching persons who have spoken or written about the subject matter that requires expert testimony. An Internet search is, in many cases, the place to start when developing a list. Counsel also might consider using a legal search engine to identify persons who have provided expert testimony on the subject matter in the past. Westlaw and LexisNexis both maintain expert databases.

Any expert who is on counsel’s list of candidates should produce, in addition to his or her curriculum vitae (CV), a list of prior court and deposition appearances, as well as a list of publications over the last 10 years. In federal court, this information must be disclosed in the expert report, per Federal Rule of Civil Procedure 26(a)(2).^[120]

Another consideration when retaining an expert is whether he or she will be a testifying expert, or whether the expert will only act in a consulting role in preparing the case for trial (non-testifying expert) because this will determine the discoverability of the expert’s opinions. Testifying experts’ opinions are always discoverable, while consulting experts’ opinions are nearly always protected from discovery.

A testifying expert must be qualified, and the proponent of an expert witness bears the burden of establishing the admissibility of the expert’s testimony by a preponderance of the evidence. Federal Rule of Evidence 702 sets forth a standard for admissibility, wherein a witness may be qualified as an expert by knowledge, skill, experience, training, or education and may testify in the form of an opinion if they meet certain criteria. Opposing counsel may challenge the qualifications of the expert before the expert’s opinions are presented; to do so, opposing counsel can ask to voir dire the expert (usually outside of the presence of the jury). It is for the trial court judge to determine whether or not “an expert’s testimony both rests on a reliable foundation and is relevant to the task at hand,” thereby making it admissible.^[121]

§ 8.6. Evidence at Trial

§ 8.6.1. Authentication of Evidence

With the exception of exhibits as to which authenticity is acknowledged by stipulation, admission, judicial notice, or exhibits which are self-authenticating, no exhibit will be received in evidence unless it is first authenticated or identified as being what it purports to be. Under the Federal Rules of Evidence, the authentication requirement is satisfied when “the proponent . . . produce[s] evidence sufficient to support a finding that the item is what the proponent claims it is.”^[122]

When an item is offered into evidence, the court may permit counsel to conduct a limited cross-examination on the foundation offered. In reaching its determination, the court must view all the evidence introduced as to authentication or identification, including issues of credibility, most favorably to the proponent.^[123] Of course, the party who opposed introduction of the evidence may still offer contradictory evidence before the trier of fact or challenge the credibility of the supporting proof in the same way that he can dispute any other testimony.^[124] However, upon consideration of the evidence as a whole, if a sufficient foundation has been laid in support of introduction, contradictory evidence goes to the weight to be assigned by the trier of fact and not to admissibility.^[125] It is important to note that many courts have held that the mere production of a document in discovery waives any argument as to its authenticity.^[126]

While there are many topics to discuss regarding authentication of evidence, this section will focus on electronically stored information. Proper authentication of e-mails and other instant communications, as well as all computerized records, is of critical importance in an ever-increasing number of cases, not only because of the centrality of such data and communications to modern business and society in general, but also due to the ease in which such electronic materials can be created, altered, and manipulated. In the ordinary course of events, a witness who has seen the e-mail in question need only testify that the printout offered as an exhibit is an accurate reproduction.

• Web print out—Printouts of Internet website pages must first be authenticated as accurately reflecting the content of the page and the image of the page on the computer at which the printout was made before they can be introduced into evidence; then, to be relevant and material to the case at hand, the printouts often will need to be further authenticated as having been posted by a particular source.^[127]
• Text and chat messages—When there has been an objection to admissibility of a text message, the proponent of the evidence must explain the purpose for which the text message is being offered and provide sufficient direct or circumstantial corroborating evidence of authorship in order to authenticate the text message as a condition precedent to its admission; thus, authenticating a text message or e-mail may be done in much the same way as authenticating a telephone call.^[128] Similarly, circumstantial evidence linking a person to a specific computer from which chat messages have been archived may be sufficient to establish admissibility.^[129]
• Social networking services—Proper inquiry for determining whether a proponent has properly authenticated evidence derived from social networking services was whether the proponent adduced sufficient evidence to support a finding by a reasonable jury that the proffered evidence was what the proponent claimed it to be.^[130]

§ 8.6.2. Objecting to Evidence

Objections must be specific. The party objecting to evidence must make known to the court and the parties the precise ground on which the objecting party is basing the objection.^[131] The objecting party must also be sure to indicate the particular portion of the evidence that is objectionable.^[132] However, a general objection may be permitted if the evidence is clearly inadmissible for any purpose or if the only possible grounds for objection is obvious.^[133]

The purpose of a specific objection to evidence is to preserve the issue on appeal. On appeal, the objecting party will be limited to the specific objections to evidence made at trial. However, an objection raised by a party in writing is sufficiently preserved for appeal, even if that same party subsequently failed to make an oral, on-the-record objection.^[134]

Objections to evidence must be timely so as to not allow a party to wait and see whether an answer is favorable before raising an objection.^[135] Failure to timely object results in the evidence being admitted. Once the evidence is admitted and becomes part of the trial record, it may be considered by the jury in deliberations, the trial court in ruling on motions, and a reviewing court determining the sufficiency of the evidence.^[136] In some instances, the trial judge may prohibit counsel from giving descriptions of the basis for his or her objections. However, the attorney must still attempt to get in the specific grounds for the objection on the record.^[137]

Counsel objecting the evidence should remember to strike the evidence from the record after their objection is sustained.

§ 8.6.3. Offer of Proof

If evidence is excluded by the trial court, the party offering the evidence must make an offer of proof to preserve the issue on appeal.^[138] For an offer of proof to be adequate to preserve an issue on appeal, counsel must state both the theory of admissibility and the content of the excluded evidence.^[139] Although best practice is to make an offer of proof at the time an objection is made, an offer of proof made later in time, even if it is made at a subsequent conference or hearing, may be acceptable.^[140] An offer of proof can take several different forms:

1. A testimonial offer of evidence, whereby counsel summarizes what the proposed evidence is supposed to be. Attorneys using this method should be cautious, however, as the testimony may be considered inadequate.^[141]
2. An examination of a witness, whereby a witness is examined and cross-examined outside of the presence of a jury.^[142]
3. A written statement by the examining counsel, which describes the answers that the proposed witness would give if allowed to testify.^[143]
4. An affidavit, taken under oath, which summarizes a witness’s expected testimony and is signed by the witness.^[144] However, this use of documentary evidence should be marked as an exhibit and introduced into the record for identification on appeal.^[145]

There are exceptions to the offer of proof requirement. First, an offer of proof is unnecessary when the content of the evidence is “apparent from the context.”^[146] Second, a cross-examiner who is conducting a proper cross-examination will be given more leeway by a court, since oftentimes the cross-examiner does not know what a witness will say if permitted to answer a question.^[147]

§ 8.7. Closing Argument

Different than an opening statement, closing argument is the time for advocacy and argument on behalf of your client. It is not an unfettered right, however, and there are certain rules to remember about closing argument. First, present only that which was presented in evidence and do not deviate from the record.^[148] You also do not want to comment on a witness that was unable to testify or suggest that a defendant’s failure to testify results in a guilty verdict.^[149] Further, an attack on the credibility or honesty of opposing counsel is considered unethical.^[150] But that does not mean lawyers cannot comment on the credibility of evidence and suggest reasonable inferences based on the evidence.^[151] In addition, keep in mind, generally, courts are “reluctant to set aside a jury verdict because of an argument made by counsel during closing arguments.”^[152]

§ 8.8. Judgment as a Matter of Law

Federal Rule of Civil Procedure 50 governs the standard for judgment as a matter of law, sometimes referred to as a directed verdict in state court matters.^[153] A motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) “may be made at any time before the case is submitted to the jury” and the motion “must specify the judgment sought and the law and facts that entitle the movant to the judgment.”^[154] But, “[a] motion under this Rule need not be stated with ‘technical precision,’” so long as “it clearly requested relief on the basis of insufficient evidence.”^[155] Although it may be “better practice,” there is no requirement that the motion be made in writing.^[156] The Sixth Circuit Court of Appeals has even held that it is “clearly within the court’s power” to raise the motion “sua sponte.”^[157]

Importantly, Rule 50 uses permissive, not mandatory, language, which means, “while a district court is permitted to enter judgment as a matter of law when it concludes that the evidence is legally insufficient, it is not required to do so.” The Supreme Court has gone as far as to say “the district courts are, if anything, encouraged to submit the case to the jury, rather than granting such motions.”^[158] There is a practical reason for this advice: if the motion is granted, then overturned on appeal, a whole new trial must be conveyed. Conversely, if the case is allowed to go to the jury, a post-verdict motion or appellate court can right any wrong with more ease.

In entertaining a motion for judgment as a matter of law, courts should review all of the evidence in the record, but, in doing so, the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.^[159] Credibility determinations, the weighing of the evidence, or the drawing of legitimate inferences from the facts are jury functions, not those of a judge.^[160] The question is not whether there is literally no evidence supporting the party against whom the motion is directed but whether there is evidence upon which the jury might reasonably find a verdict for that party. Since granting judgment as a matter of law deprives the party opposing the motion of a determination of the facts by a jury, it is understandable that it is to be granted cautiously and sparingly by the trial judge. Because a failure to bring a 50(a) motion at the close of evidence will preclude the trial judge from granting judgment as a matter of law after the verdict,^[161] parties should consider bringing a 50(a) motion even if it is unlikely to be granted.^[162]

§ 8.9. Jury Instructions

§ 8.9.1. General

The purpose of jury instructions is to advise the jury on the proper legal standards to be applied in determining issues of fact as to the case before them.^[163] The court may instruct the jury at any time before the jury is discharged.^[164] But the court must first inform the parties of its proposed instructions and give the parties an opportunity to respond.^[165] Although each party is entitled to have the jury charged with his or her theory of the case, the proposed instructions must be supported by the law and the evidence.^[166]

§ 8.9.2. Objections

Federal Rule of Civil Procedure 51 provides counsel the ability to correct errors in jury instructions.^[167] The philosophy underlying the provisions of Rule 51 is to prevent unnecessary appeals of matters concerning jury instructions, which should have been resolved at the trial level. An objection must be made on the record and state distinctly the matter objected to and the grounds for the objection.^[168] Off-the-record objections to jury instructions, regardless of how specific, cannot satisfy requirements of the rule governing preservation of such errors.^[169] A party may object to instructions outside the presence of the jury before the instructions and arguments are delivered or promptly after learning that the instructions or request will be, or has been, given or refused.^[170] Even if the initial request for an instruction is made in detail, the requesting party must object again after the instructions are given but before the jury retires for deliberations, in order to preserve the claimed error.^[171]

Whether a jury instruction is improper is a question of law reviewed de novo.^[172] Instructions are improper if, when viewed as a whole, they are confusing, misleading, and prejudicial.^[173] If an instruction is improper, the judgment will be reversed, unless the error is harmless.^[174] A motion for new trial is not appropriate where the omitted instructions are superfluous and potentially misleading.^[175]

Further, while some courts have been lenient on whether objections are made in accordance with Rule 51, many courts hold that one who does not object in accordance with Rule 51 is deemed to have waived the right to appeal. A patently erroneous instruction can be considered on appeal if the error is “fundamental” and involves a miscarriage of justice, but the movant claiming the error has the burden of demonstrating it is a fundamental error.^[176]

§ 8.10. Conduct of Jury

§ 8.10.1. Conduct During Deliberations

Jury deliberations must remain private in order to protect the jury’s deliberations from improper, outside influence.^[177] Control over the jury during deliberations, including the decision whether to allow the jurors to separate before a verdict is reached, is in the sound discretion of the trial court.^[178] During this time, a judge may consider the fatigue of the jurors in determining whether the time of deliberations could preclude effective and impartial deliberation absent a break.^[179] Although admonition of the jury is not required, one should be given if the jury is to separate at night and could potentially interact with third parties.^[180]

The only individuals permitted in the jury room during deliberations are the jurors. However, in the case of a juror with a hearing or speech impediment, the court will appoint an appropriate professional to assist that individual and the presence of that professional is not grounds for reversal so long as the professional: (1) does not participate in deliberations; and (2) takes an oath to that effect.^[181]

Courts have broad discretion in determining what materials will be permitted in the jury room.^[182] Materials received into evidence are generally permitted,^[183] including real evidence,^[184] documents,^[185] audio recordings,^[186] charts and summaries admitted pursuant to Federal Rule of Evidence 1006,^[187] video recordings,^[188] written stipulations,^[189] depositions,^[190] drugs,^[191] and weapons.^[192] Additionally, jurors are typically permitted to use any notes he or she has taken over the course of trial.^[193] Pleadings, however, are ordinarily not allowed.^[194]

§ 8.10.2. Conduct During Trial

Traditionally, the trial judge has discretion to manage the jury during trial.^[195] To ensure the jurors are properly informed, the court may, at any time after the commencement of trial, instruct the jury regarding a matter related to the case or a principal of law.^[196] If a party wishes to present an exhibit to the jurors for examination over the course of trial, counsel should request that the court admonish the jury not to place undue emphasis on the evidence presented.^[197] Additionally, the trial court may, in its informed discretion, permit a jury view of the premises that is the subject of the litigation.^[198]

During trial, the court may allow the jury to take notes and dictate the procedure for doing so.^[199] The trial court may permit note-taking for all of the trial or restrict the practice to certain parts.^[200] A concern of permitting note-taking during trial is that jurors may place too much significance on their notes and too little significance on their recollection of the trial testimony.^[201] To mitigate this risk, a judge should give a jury instruction informing each juror that he or she should rely on his memory and only use notes to assist that process.^[202]

Allowing a juror to participate in examining a witness is within the discretion of the trial court,^[203] although some courts have strongly opposed the practice.^[204] If allowed, procedural protections should be encouraged to mitigate the risks of questions.^[205] Additionally, the court should permit counsel to re-question the witness after a juror question has been posed.^[206]

While trial is ongoing, jurors should not discuss the case among themselves^[207] or share notes^[208] prior to the case being submitted for deliberations. The same rule applies to communication between jurors and trial counsel^[209] or jurors and the parties,^[210] although accidental or unintentional contact may be excused.^[211]

§ 8.11. Relief from Judgment

§ 8.11.1. Renewed Motion for Judgment as a Matter of Law

Pursuant to Federal Rule of Civil Procedure 50(b) a party may file a “renewed” motion for judgment as a matter of law, previously known as a “motion for directed verdict,” asserting that the jury erred in returning a verdict based on insufficient evidence.^[212] However, as explained above, in order to file a 50(b) motion, a party must have filed a Rule 50(a) pre-verdict motion for judgment as a matter of law before the case was submitted to the jury.^[213] The renewed motion is limited to issues that were raised in a “sufficiently substantial way” in the pre-verdict motion^[214] and failure to comply with this process often results in waiver.^[215] The renewed motion must be filed no later than 28 days after the entry of judgment.^[216]

The standard for granting a renewed motion for judgment as a matter of law mirrors the standard for granting the pre-verdict motion under Rule 50(a).^[217] A party is entitled to judgment only if a reasonable jury lacked a legally sufficient evidentiary basis to return the verdict that it did.^[218] In rendering this analysis, a court may not weigh conflicting evidence and inferences or determine the credibility of the witnesses.^[219] Upon review, the court must:

(1) consider the evidence in the light most favorable to the prevailing party, (2) assume that all conflicts in the evidence were resolved in favor of the prevailing party, (3) assume as proved all facts that the prevailing party’s evidence tended to prove, and (4) give the prevailing party the benefit of all favorable inferences that may reasonably be drawn from the facts proved. That done, the court must then deny the motion if reasonable persons could differ as to the conclusions to be drawn from the evidence.^[220]

The analysis reflects courts’ general reluctance to interfere with a jury verdict.^[221]

§ 8.11.2. Motion for New Trial

Federal Rule of Civil Procedure 59 permits a party to file a motion for new trial, either together with or as an alternative to a 50(b) renewed motion for judgment as a matter of law.^[222] Like a renewed motion for judgment as a matter of law, a motion for new trial must be filed no later than 28 days after an entry of judgment.^[223]

Rule 59 does not specify or limit the grounds on which a new trial may be granted.^[224] A party may move for a new trial on the basis that “the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair . . . and may raise questions of law arising out of alleged substantial errors in admission or rejection of evidence.”^[225] Other recognized grounds for new trial include newly discovered evidence,^[226] errors involving jury instruction,^[227] and conduct of counsel.^[228] Courts often grant motions for new trial on the issue of damages alone.^[229]

Unlike when reviewing a motion for judgment as a matter of law, courts may independently evaluate and weigh the evidence.^[230] Additionally, the Court, on its own initiative with notice to the parties and an opportunity to be heard, may order a new trial on grounds not stated in a party’s motion.^[231]

When faced with a renewed judgment as a matter of law or a motion for new trial, courts have three options. They may (1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a matter of law.^[232]

§ 8.11.3. Clerical Mistake, Oversights and Omissions

Federal Rule of Civil Procedure 60(a) provides that “the court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record. The court may do so on motion or on its own, with or without notice.” This rule applies in very specific and limited circumstances, when the record makes apparent that the court intended one thing but by mere clerical mistake or oversight did another; such mistake must not be one of judgment or even of misidentification, but merely of recitation, of the sort that clerk or amanuensis might commit, mechanical in nature.^[233] It is important to note that this rule can be applied even after a judgment is affirmed on appeal.^[234]

§ 8.11.4. Other Grounds for Relief

Federal Rule of Civil Procedure 60(b) provides for several additional means for relief from a final judgment:

1. mistake, inadvertence, surprise, or excusable neglect;
2. newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b);
3. fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;
4. the judgment is void;
5. the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or
6. any other reason that justifies relief.

Courts typically require that the evidence in support of the motion for relief from a final judgement be “highly convincing.”^[235]

1. See Fed. R. Civ. P. 16. ↑

2. Id. ↑

3. Fed. R. Civ. P. 26(e). ↑

4. See Basista v. Weir, 340 F.2d 74, 85 (3d Cir. 1965). ↑

5. See Fed. R. Civ. P. 26. ↑

6. Luce v. United States, 469 U.S. 38, 40 n.2 (1984). ↑

7. United States v. Romano, 849 F.2d 812, 815 (3d Cir. 1988). ↑

8. Frintner v. TruPosition, 892 F. Supp. 2d 699 (E.D. Pa. 2012). ↑

9. United States v. LeMay, 260 F.3d 1018, 1028 (9th Cir. 2001). ↑

10. Wilson v. Williams, 182 F.3d 562, 565–66 (7th Cir. 1999). ↑

11. Id. at 566 (“Definitive rulings, however, do not invite reconsideration.”). ↑

12. Fusco v. General Motors Corp., 11 F.3d 259, 262–63 (1st Cir. 1993). ↑

13. Flythe v. District of Columbia, 4 F. Supp. 3d 222 (D.D.C. 2014). ↑

14. U.S. v. Denton, 547 F. Supp. 16 (E.D. Tenn. 1982). ↑

15. Henwood v. People, 57 Colo 544, 143 P. 373 (1914). An opening statement presents counsel with the opportunity to summarily outline to the trier of fact what counsel expects the evidence presented at trial will show. Lovell v. Sarah Bush Lincoln Health Center, 397 Ill. App. 3d 890, 931 N.E.2d 246 (4th Dist. 2010). ↑

16. Testa v. Mundelein, 89 F.3d 445 (7th Cir. 1996) (“being argumentative in an opening statement does not necessarily warrant a mistrial, but being argumentative and introducing something that should not be allowed into evidence may be a predicate for a mistrial.”). ↑

17. Krengiel v. Lissner Copr., Inc., 250 Ill App. 3d 288, 621 N.E.2d 91 (1st Dist. 1993) (“party whose motion in limine has been denied must object when the challenged evidence is presented at trial in order to preserve the issue for review, and the failure to raise such an objection constitutes a waiver of the issue on appeal.”). ↑

18. Forrestal v. Magendantz, 848 F.2d 303, 308 (1st Cir. 1988) (suggesting to jury to put itself in shoes of plaintiff to determine damages improper because it encourages the jury to depart from neutrality and to decide the case on the basis of personal interest and bias rather than on the evidence.). ↑

19. U.S. Const. amend. VI. ↑

20. See Kiernan v. Van Schaik, 347 F.2d 775, 778 (3d Cir. 1965); McCoy v. Goldston, 652 F.2d 654, 657 (6th Cir. 1981), abrogated on other grounds. ↑

21. U.S. Const. amend. VII; Kiernan, 347 F.2d at 778. ↑

22. Fleming v. Chicago Transit Auth., 397 F. App’x 249, 249–50 (7th Cir. 2010) (quoting Jury Selection & Serv. Act of 1968, 28 U.S.C. §§ 1861–74 (2006)). ↑

23. Irvin v. Dowd, 366 U.S. 717, 727 (1961). ↑

24. Zia Shadows, L.L.C. v. City of Las Cruces, 829 F.3d 1232 (10th Cir. 2016). ↑

25. Turner v. Murray, 476 U.S. 28 (1986). ↑

26. Wainwright v. Witt, 469 U.S. 412, 423 (1985). ↑

27. Harris v. Pulley, 885 F.2d 1354, 1361 (9th Cir. 1988). ↑

28. Id. at 1362. ↑

29. Id. at 1361. ↑

30. Id. ↑

31. People v. Jordan, 2019 IL App (1st Dist.) 161848. ↑

32. Singer v. United States, 380 U.S. 24, 36 (1965) (finding that it is constitutionally permissible to require prosecutor and judge to consent to bench trial, even if the defendant elects one); United States v. Talik, No. CRIM.A. 5:06CR51, 2007 WL 4570704, at *6 (N.D.W. Va. Dec. 26, 2007). ↑

33. Fed. R. Civ. P. 38; Hopkins v. JPMorgan Chase Bank, NA, 618 F. App’x 959, 962 (11th Cir. 2015). ↑

34. Hopkins, 618 F. App’x at 962. ↑

35. U.S. Const. amend. VII. ↑

36. Lorillard v. Pons, 434 U.S. 575, 583 (1978). ↑

37. See Lutz v. Glendale Union High Sch., 403 F.3d 1061, 1069 (9th Cir. 2005) (“[W]e hold that there is no right to have a jury determine the appropriate amount of back pay under Title VII, and thus the ADA, even after the Civil Rights Act of 1991. Instead, back pay remains an equitable remedy to be awarded by the district court in its discretion.”); see also Bledsoe v. Emery Worldwide Airlines, 635 F.3d. 836, 840–41 (6th Cir. 2011) (holding “statutory remedies available to aggrieved employees under the Worker Adjustment and Retraining Notification (WARN) act provide equitable restitutionary relief for which there is no constitutional right to a jury trial.”). ↑

38. K.M.C. Co. v. Irving Tr. Co., 757 F.2d 752, 758 (6th Cir. 1985); Leasing Serv. Corp. v. Crane, 804 F.2d 828, 832 (4th Cir. 1986); Telum, Inc. v. E.F. Hutton Credit Corp., 859 F.2d 835, 837 (10th Cir. 1988). ↑

39. Zaklit v. Glob. Linguist Sols., LLC, 53 F. Supp. 3d 835, 854 (E.D. Va. 2014); see also Nat’l Equip. Rental, Ltd. v. Hendrix, 565 F.2d 255, 258 (2d Cir. 1977). ↑

40. United States v. Steele, 298 F.3d 906, 912 (9th Cir. 2002) (“The fundamental purpose of voir dire is to ‘ferret out prejudices in the venire’ and ‘to remove partial jurors.’”) (quoting United States v. Howell, 231 F.3d 615, 627–28 (9th Cir. 2000)); Bristol Steel & Iron Works v. Bethlehem Steel Corp., 41 F.3d 182, 189 (4th Cir. 1994) (stating that the purpose of voir dire is to ensure a fair and impartial jury, not to operate as a discovery tool by opposing counsel). ↑

41. Mu’Min v. Virginia, 500 U.S. 415, 431 (1991). ↑

42. United States v. Piancone, 506 F.2d 748, 751 (3d Cir. 1974). ↑

43. Id. ↑

44. United States v. Delgado, 668 F.3d 219, 228 (5th Cir. 2012). ↑

45. Finks v. Longford Equip. Int’l, 208 F.3d 225, at *2 (10th Cir. February 25, 2000). ↑

46. Fed. R. Civ. P. 47(a). ↑

47. Hicks v. Mickelson, 835 F.2d 721, 726 (8th Cir. 1987). ↑

48. U.S. v. Lewin, 467 F.2d 1132 (7th Cir. 1972) (citing Fed. R. Crim. P. 24(a)). ↑

49. U.S. v. Lawes, 292 F.3d 123, 128 (2d Cir. 2002); Hicks v. Mickelson, 835 F.2d 721, 723–26 (8th Cir. 1987). ↑

50. Lawes, 292 F.3d at 128 (noting that “federal trial judges are not required to ask every question that counsel—even all counsel—believes is appropriate”). ↑

51. Finks v. Longford Equip. Int’l, 208 F.3d 225, at *2 (10th Cir. 2000). ↑

52. Mayes v. Kollman, 560 Fed. Appx. 389, 395 n.13 (5th Cir. 2014); Richardson v. New York City, 370 Fed. Appx. 227 (2d Cir. 2010); c.f. Kiernan v. Van Schaik, 347 F.2d 775, 779 (3d Cir. 1965) (finding that judge’s refusal to ask prospective jurors questions about connection to insurance companies constituted reversible error). ↑

53. See 28 U.S.C. § 1865(b). ↑

54. 28 U.S.C. § 1866. ↑

55. United States v. Bishop, 264 F.3d 535, 554–55 (5th Cir. 2001). ↑

56. United States v. Price, 573 F.2d 356, 389 (5th Cir. 1978). ↑

57. Chestnut v. Ford Motor Co., 445 F.2d 967 (4th Cir. 1971); c.f. United States v. Turner, 389 F.3d 111 (4th Cir. 2004) (finding that district court was within its discretion in failing to disqualify jurors who banked with a different branch of the bank that was robbed). ↑

58. United States v. Chapdelaine, 989 F.2d 28 (1st Cir. 1993). ↑

59. Leibstein v. LaFarge N. Am., Inc., 767 F. Supp. 2d 373 (E.D.N.Y. 2011), as amended (Feb. 15, 2011). ↑

60. Cravens v. Smith, 610 F.3d 1019, 1032 (8th Cir. 2010). ↑

61. See 28 U.S.C. § 1866 (stating that a juror may be “excluded upon peremptory challenge as provided by law”). ↑

62. Davis v. United States, 374 F.2d 1, 5 (1967) (“The essential nature of the peremptory challenge is that it is one exercised without a reason stated, without inquiry and without being subject to the court’s control.”). ↑

63. 28 U.S.C. § 1870; see also Fedorchick v. Massey-Ferguson, Inc., 577 F.2d 856 (3d Cir. 1978). ↑

64. Stephens v. Koch Foods, LLC, No. 2:07-CV-175, 2009 WL 10674890, at *1 (E.D. Tenn. Oct. 20, 2009). ↑

65. Id. ↑

66. Id. ↑

67. Id. ↑

68. See Batson v. Kentucky, 476 U.S. 79 (1986) (race); J.E.B. v. Alabama ex rel. T.B., 511 U.S. 127 (1994) (gender); Rivera v. Nibco, Inc., 372 F. App’x 757, 760 (9th Cir. 2010) (national origin). ↑

69. Powers v. Ohio, 499 U.S. 400, 409 (1991). ↑

70. Robinson v. R.J. Reynolds Tobacco Co., 86 F. App’x 73, 75 (6th Cir. 2004). ↑

71. Rivera v. Illinois, 556 U.S. 148 (2009); see also King v. Peco Foods, Inc., No. 1:14-CV-00088, 2017 WL 2424574 (N.D. Miss. Jun. 5, 2017). ↑

72. Kirk v. Raymark Indus., Inc., 61 F.3d 147, 157 (3d Cir. 1995) (holding, in asbestos litigation, that trial court’s refusal to remove two panelists for cause was error, and the party’s subsequent use of peremptory challenges to remedy the judge’s mistake required per se reversal and a new trial) (citations omitted). ↑

73. Linden v. CNH Am., LLC, 673 F.3d 829, 840 (8th Cir. 2012). ↑

74. Black’s Law Dictionary 460 (6th ed. 1990). ↑

75. Fed. R. Evid. 611(c). ↑

76. McClard v. United States, 386 F.2d 495, 501 (8th Cir. 1967). ↑

77. Rodriguez v. Banco Cent. Corp., 990 F.2d 7, 12–13 (1st Cir. 1993). ↑

78. United States v. Rojas, 520 F.3d 876, 881 (8th Cir. 2008) (citing U.S. v. Butler, 56 F.3d 941, 943 (8th Cir. 1995)). ↑

79. United States v. Carpenter, 819 F.3d 880, 891 (6th Cir. 2016), reversed and remanded on other grounds, 138 S. Ct. 2206, 201 L. Ed. 2d 507 (2018). ↑

80. U.S. v. Hernandez-Albino, 177 F.3d 33, 42 (1st Cir. 1999). ↑

81. United States v. Grassrope, 342 F.3d 866, 869 (8th Cir. 2003) (permitting leading questions when examining a sexual assault victim). ↑

82. U.S. v. Mulinelli-Navas, 111 F.3d 983, 990 (1st Cir. 1997). ↑

83. See United States v. Lin, 101 F.3d 760, 770 (D.C. Cir. 1996). ↑

84. United States v. Jacobs, 215 Fed. Appx. 239, 241 (4th Cir. 2007) (citing United States v. Lewis, 10 F.3d 1086, 1089 (4th Cir. 1993)). ↑

85. Raysor v. Port Authority of New York & New Jersey, 768 F.2d 34, 40 (2d Cir. 1985). ↑

86. Id. ↑

87. Elgabri v. Lekas, 964 F.2d 1255, 1260 (1st Cir. 1992). ↑

88. See Rosa-Rivera v. Dorado Health, Inc., 787 F.3d 614, 617 (1st Cir. 2015) (employees); United States v. Bryant, 461 F.2d 912, 918–19 (6th Cir. 1972) (informants); United States v. Hicks, 748 F.2d 854, 859 (4th Cir. 1984) (girlfriend). ↑

89. See U.S. v. Cisneros-Gutierrez, 517 F.3d 751, 762 (5th Cir. 2008). ↑

90. Fed. R. Evid. 612 authorizes a party to refresh a witness’s memory with a writing so long as the “adverse party is entitled to have the writing produced at the hearing, to inspect it, to cross-examine the witness thereon, and to introduce in evidence those portions which relate to the testimony of the witness.” ↑

91. Rush v. Illinois Cent. R. Co., 399 F.3d 705, 715–22 (6th Cir. 2005). ↑

92. Rush v. Illinois Cent. R. Co., 399 F.3d 705, 715–22 (6th Cir. 2005). ↑

93. Id. at 718–19. ↑

94. United States v. Logan, 121 F.3d 1172, 1175 (8th Cir. 1997). ↑

95. United States v. Lemon, 497 F.2d 854, 857 (10th Cir. 1974). ↑

96. See Fed. R. Evid. 607. ↑

97. Id. ↑

98. Util. Control Corp. v. Prince William Const. Co., 558 F.2d 716, 720 (4th Cir. 1977). ↑

99. United States v. Gilbert, 57 F.3d 709, 711 (9th Cir. 1995). ↑

100. United States v. Finley, 708 F. Supp. 906 (N.D. Ill. 1989). ↑

101. United States v. Finis P. Ernest, Inc., 509 F.2d 1256, 1263 (7th Cir. 1975); United States v. Prince, 491 F.2d 655, 659 (5th Cir. 1974). ↑

102. See Davis v. Alaska, 415 U.S. 308, 316, 94 S. Ct. 1105, 1110, 39 L. Ed. 2d 347 (1974) (“Cross-examination is the principal means by which the believability of a witness and the truth of his testimony are tested.”). ↑

103. See Fed. R. Evid. 611(b) (effective December 1, 2011) (“(b) Scope of Cross-Examination. Cross-examination should not go beyond the subject matter of the direct examination and matters affecting the witness’s credibility. The court may allow inquiry into additional matters as if on direct examination.”). ↑

104. See United States v. Perez-Solis, 709 F.3d 453, 463–64 (5th Cir. 2013); see also United States v. Arias-Villanueva, 998 F.2d 1491, 1508 (9th Cir. 1993) (cross-examination is within the scope of direct where it is “reasonably related” to the issues put in dispute by direct examination), overruled on other grounds; United States v. Moore, 917 F.2d 215 (6th Cir. 1990) (subject matter of direct examination under Rule 611(b) includes all inferences and implications arising from the direct); United States v. Arnott, 704 F.2d 322, 324 (6th Cir. 1983) (“The ‘subject matter of the direct examination,’ within the meaning of Rule 611(b), has been liberally construed to include all inferences and implications arising from such testimony.”). ↑

105. Perez-Solis, 709 F.3d at 464. ↑

106. Id; see also MDU Resources Group v. W.R. Grace and Co., 14 F.3d 1274, 1282 (8th Cir. 1994), cert. denied, 513 U.S. 824, 115 S. Ct. 89, 130 L. Ed. 2d 40 (1994) (“When cross-examination goes beyond the scope of direct, as it did here, and is designed, as here, to establish an affirmative defense (that the statute of limitations had run), the examiner must be required to ask questions of non-hostile witnesses as if on direct.). ↑

107. Under Fed. R. Evid. 608, if the witness concedes the bad act, impeachment is accomplished. If the witness denies the bad act, Rule 608(b) precludes the introduction of extrinsic evidence to prove the act. In short, the cross-examining lawyer must live with the witness’s denial. ↑

108. To qualify, “the crime must have been a felony, or a misdemeanor that has some logical nexus with the character trait of truthfulness, such as when the elements of the offense involve dishonesty or false statement. The conviction must have occurred within ten years of the date of the witness’s testimony at trial, or his or her release from serving the sentence imposed under the conviction, whichever is later, unless the court permits an older conviction to be used, because its probative value substantially outweighs any prejudice, and it should, in the interest of justice, be admitted to impeach the witness. If the prior conviction is used to impeach a witness other than an accused in a criminal case, its admission is subject to exclusion under Rule 403 if the probative value of the evidence is substantially outweighed by the danger of unfair prejudice, delay, confusion or the introduction of unnecessarily cumulative evidence. If offered to impeach an accused in a criminal case, the court still may exclude the evidence, if its probative value is outweighed by its prejudicial effect.” Behler v. Hanlon, 199 F.R.D. 553, 559 (D. Md. 2001). ↑

109. Fed. R. Evid. 608 (bad acts or character of untruthfulness); Fed. R. Evid. 609 (qualifying crime); Fed. R. Evid. 613 (prior inconsistent statement). ↑

110. Behler, 199 F.R.D. at 556. ↑

111. 353 F.2d 324, 325–26 (1st Cir. 1965). ↑

112. 927 F.2d 838, 841 (5th Cir. 1991). ↑

113. 250 F.3d 10, 16–17 (1st Cir. 2001). ↑

114. 237 F.3d 8, 16–17 (1st Cir. 2001). ↑

115. 248 Fed. Appx. 718, 726 (6th Cir. 2007). ↑

116. 653 F.2d 915, 920–21 (5th Cir. 1981). ↑

117. United States v. James, 510 F.2d 546, 551 (5th Cir. 1975). ↑

118. United States v. Blackwood, 456 F.2d 526, 529–30 (2d Cir. 1972). ↑

119. Id. ↑

120. Fed. R. Civ. P. 26(a)(2). ↑

121. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597 (1993). ↑

122. Fed. R. Evid. 901. ↑

123. U.S. v. Goichman, 547 F.2d 778, 784 (3d Cir. 1976) (“[T]here need be only a prima facie showing, to the court, of authenticity, not a full argument on admissibility . . . . [I]t is the jury who will ultimately determine the authenticity of the evidence, not the court.”). ↑

124. Id. ↑

125. Fed. R. Evid. 803(6), 902(11); United States v. Senat, 698 F. App’x 701, 706 (3d. Cir. 2017). ↑

126. See, e.g., Stumpff v. Harris, 31 N.E.3d 164, 173 (Ohio App. 2 Dist. 2015) (“Numerous courts, both state and federal, have held that items produced in discovery are implicitly authenticated by the act of production by the opposing party); Churches of Christ in Christian Union v. Evangelical Ben. Trust, S.D. Ohio No. C2:07CV1186, 2009 WL 2146095, *5 (July 15, 2009) (“Where a document is produced in discovery, ‘there [is] sufficient circumstantial evidence to support its authenticity’ at trial.”). ↑

127. In re L.P., 749 S.E.2d 389, 392–392 (Ga. Ct. App. 2013). ↑

128. Rules of Evid., Rule 901(a). Idaho v. Koch, 334 P.3d 280 (Idaho 2014). ↑

129. U.S. v. Manning, 738 F. 3d 937, 942–943 (8th Cir. 2014). ↑

130. State v. Smith, 2015-1359 La. App. 4 Cir. 4/20/16, 2016 WL 3353892, *10–11 (La. Ct. App. 4th Cir. 2016); see also OraLabs, Inc. v. Kind Group LLC, 2015 WL 4538444, *4, n.7 (D. Colo. 2015) (in a patent and trade dress infringement action, the court admitted, over hearsay objections, Twitter posts offered to show actual confusion between the plaintiff’s and defendant’s products.). ↑

131. Jones v. U.S., 813 A.2d 220, 226–227 (D.C. 2002). ↑

132. Dente v. Riddell, Inc., 664 F.2d 1, 2 n.1 (1st Cir. 1981). ↑

133. Mills v. Texas Compensation Ins. Co., 220 F.2d 942, 946 (5th Cir. 1955). ↑

134. U.S. v. Gomez-Alvarez, 781 F.3d 787, 792 (5th Cir. 2015). ↑

135. Jerden v. Amstutz, 430 F.3d 1231, 1237 (9th Cir. 2005). ↑

136. See, e.g., Hastings v. Bonner, 578 F.2d 136, 142–143 (5th Cir. 1978); United States v. Johnson, 577 F.2d 1304, 1312 (5th Cir. 1978); United States v. Jamerson, 549 F.2d 1263, 1266–67 (9th Cir. 1977). ↑

137. See United States v. Henderson, 409 F.3d 1293, 1298 (11th Cir. 2005). ↑

138. Inselman v. S & J Operating Co., 44 F.3d 894, 896 (10th Cir. 1995). ↑

139. See United States v. Adams, 271 F.3d 1236, 1241 (10th Cir. 2001) (“In order to qualify as an adequate offer of proof, the proponent must, first, describe the evidence and what it tends to show and, second, identify the grounds for admitting the evidence.”). ↑

140. Murphy v. City of Flagler Beach, 761 F.2d 622 (11th Cir. 1985). ↑

141. See id. at 1241–42 (“On numerous occasions we have held that merely telling the court the content of . . . proposed testimony is not an offer of proof.”). ↑

142. Fed. R. Evid. 103(c) (The trial court “may direct an offer of proof be made in question-and-answer form.”). See, e.g., United States v. Yee, 134 F.R.D. 161, 168 (N.D. Ohio 1991) (stating that “hearings were held for approximately six weeks” on whether DNA evidence was admissible). ↑

143. Adams, 271 F.2d at 1242. ↑

144. Id. ↑

145. Palmer v. Hoffman, 318 U.S. 109, 116 (1943). ↑

146. Fed. R. Evid. 103(a)(2); Beech Aircraft v. Rainy, 488 U.S. 153 (1988). ↑

147. Alford v. United States, 282 U.S. 687, 692 (1931). ↑

148. United States v. Harris, 536 F.3d 798, 812 (7th Cir. Ill. Aug. 6, 2008), overruled on other grounds. ↑

149. See, e.g., United States v. St. Michael’s Credit Union, 880 F.2d 579 (1st Cir. 1989); Griffin v. California, 380 U.S. 609, 615 (Apr. 28, 1965). ↑

150. Model Rule of Professional Conduct Rule 3.4(e). ↑

151. Jones v. Lincoln Elec. Co., 188 F.3d 709, 731 (7th Cir. 1999) (“We find nothing improper in this line of argument. Closing arguments are the time in the trial process when counsel is given the opportunity to discuss more freely the weaknesses in his opponent’s case.”). ↑

152. Vineyard v. County of Murray, Ga., 990 F.2d 1207, 1214 (11th Cir. 1993). ↑

153. See Fed. R. Civ. P. 50(a)(1) (“If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may: (A) resolve the issue against the party; and (B) grant a motion for judgment as a matter of law against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.”). ↑

154. Fed. R. Civ. P. 50(a)(2). ↑

155. Arch Ins. Co. v. Broan-NuTone, LLC, 509 F. App’x 453, n.5 (6th Cir. 2012) (quoting Ford v. Cnty. of Grand Traverse, 535 F.3d 483, 492 (6th Cir. 2008)). ↑

156. U. S. Indus., Inc. v. Semco Mfg., Inc., 562 F.2d 1061, 1065 (8th Cir. 1977). ↑

157. Am. & Foreign Ins. Co. v. Gen. Elec. Co., 45 F.3d 135, 139 (6th Cir. 1995). ↑

158. Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 405 (2006). ↑

159. Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S. 133, 120 S. Ct. 2097, 147 L. Ed. 2d 105 (2000); citing Lytle v. Household Mfg., Inc., 494 U.S. 545, 554–555, 110 S. Ct. 1331, 108 L.Ed.2d 504 (1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S. Ct. 2505, 91 L.Ed.2d 202 (1986); Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, n.6, 82 S. Ct. 1404, 8 L.Ed.2d 777 (1962). ↑

160. Id. ↑

161. Fed. R. Civ. P. 50(b). ↑

162. Salazar v. AT&T Mobility LLC, 2023 WL 2778774 (Fed. Cir. Apr. 5, 2023) (party that made 50(a) motion but failed to move on the issue of infringement could not raise infringement in 50(b) motion). ↑

163. Daly v. Moore, 491 F.2d 104 (5th Cir. 1974) (explaining that a court should refuse instructions not applicable to the facts). ↑

164. Fed. R. Civ. P. 51(b)(3). ↑

165. Fed. R. Civ. P. 51(b) (1)-(2); see also Vialpando v. Cooper Cameron Corp., 92 F. App’x 612 (10th Cir. 2004) (explaining that “a district court can no longer give mid-trial instructions without first advising the parties of its intent to do so and giving the parties an opportunity to object to the proposed instruction.”). ↑

166. Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846-LHK, 2017 WL 3232424 (N.D. Cal. July 28, 2017); see also Daly, 491 F.2d.104 (affirming court’s omission of instructions on the due process requirements of the Fourteenth Amendment since no facts supported a violation). ↑

167. Fed. R. Civ. P. 51. ↑

168. Estate of Keatinge v. Biddle, 316 F.3d 7 (1st Cir. 2002). ↑

169. Positive Black Talk Inc. v. Cash Money Records, Inc., 394 F.3d 357, 65 Fed. R. Evid. Serv. 1366 (5th Cir. 2004), abrogated on other grounds. ↑

170. Fed. R. Civ. P. 51(c)(2); Fed. R. Crim. P. 30(d); see also Abbott v. Babin, No. CV 15-00505-BAJ-EWD, 2017 WL 3138318, at *3 (M.D. La. May 26, 2017) (explaining that upon an untimely objection courts may only consider a plain error in the jury instructions). ↑

171. Fed. Rules Civ. Proc. Rule 51; Foley v. Commonwealth Elec. Co., 312 F.3d 517, 90 Fair Empl. Prac. Cas. (BNA) 895 (1st Cir. 2002). ↑

172. Chuman v. Wright, 76 F.3d 292, 294 (9th Cir. 1996). ↑

173. Benaugh v. Ohio Civil Rights Comm’n, No. 104-CV-306, 2007 WL 1795305 (S.D. Ohio June 19, 2007), aff’d, 278 F. App’x 501 (6th Cir. 2008). ↑

174. Chuman v. Wright, 76 F.3d 292, 294 (9th Cir. 1996) (reversing judgment since the instructions could allow a jury to find the defendant liable based on premise unsupported by law). ↑

175. United States v. Grube, No. CRIM C2-98-28-01, 1999 WL 33283321 (D.N.D. Jan. 16, 1999) (denying motion for new trial since the omitted instructions were superfluous and potentially misleading); see also Cupp v. Naughten, 414 U.S. 141, 94 S. Ct. 396, 397, 38 L. Ed. 2d 368 (1973); Lannon v. Hogan, 555 F. Supp. 999 (D. Mass.), aff’d, 719 F.2d 518 (1st Cir. 1983) (generally cannot seek such relief based on a claim of improper jury instructions, unless the error “so infect[ed] the entire trial that the resulting conviction violated the requirements of Due Process Clause and the Fourteenth Amendment.”). ↑

176. Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48 (2d Cir. 2002) (failure to make specific objections to jury instructions before jury retires to deliberate results in waiver, and Court of Appeals may review the instruction for fundamental error only.). ↑

177. United States v. Olano, 507 U.S. 725, 737 (1993). ↑

178. Cleary v. Indiana Beach, Inc., 275 F.2d 543, 545–46 (7th Cir. 1960); Sullivan v. United States, 414 F.2d 714, 715–16 (9th Cir. 1969). ↑

179. Cleary, 275 F.2d at 546; Magnuson v. Fairmont Foods Co., 442 F.2d 95, 98–99 (7th Cir. 1971). ↑

180. See United States v. Williams, 635 F.2d 744, 745–46 (8th Cir. 1980) (“It is essential to a fair trial, civil or criminal, that a jury be cautioned as to permissible conduct in conversations outside the jury room. Such an admonition is particularly needed before a jury separates at night when they will converse with friends and relatives or perhaps encounter newspaper or television coverage of the trial.”); United States v. Hart, 729 F.2d 662, 667 n.10 (10th Cir. 1984) (“[A]n admonition . . . should be given at some point before jurors disperse for recesses or for the day, with reminders about the admonition sufficient to keep the jurors alert to proper conduct on their part.”). ↑

181. United States v. Dempsey, 830 F.2d 1084, 1089–90 (10th Cir. 1987). ↑

182. United States v. Gross, 451 F.2d 1355, 1359 (9th Cir. 1971). ↑

183. United States v. Williams, 87 F.3d 249, 255 (8th Cir. 1996). ↑

184. Taylors v. Reo Motors, Inc., 275 F.2d 699, 705–06 (10th Cir. 1960). ↑

185. United States v. DeCoito, 764 F.2d 690, 695 (9th Cir. 1985). ↑

186. United States. v. Welch, 945 F.2d 1378, 1383 (7th Cir. 1991). ↑

187. Pierce v. Ramsey Winch Co., 753 F.2d 416, 431 (5th Cir. 1985). ↑

188. United States v. Chadwell, 798 F.3d 910, 914–15 (9th Cir. 2015). ↑

189. United States v. Aragon, 983 F.2d 1306, 1309 (4th Cir. 1993). ↑

190. Johnson v. Richardson, 701 F.2d 753, 757 (8th Cir. 1983). ↑

191. United States v. de la Cruz-Paulino, 61 F.3d 986, 997 (1st Cir. 1995). ↑

192. United States v. Gonzales, 121 F.3d 928, 945 (5th Cir. 1997), overruled on other grounds. ↑

193. United States v. Anthony, 565 F.2d 533, 536 (8th Cir. 1977); Unites States v. Johnson, 584 F.2d 148, 157–58 (6th Cir. 1978). ↑

194. McGowan v. Gillenwater, 429 F.2d 586, 587 (4th Cir. 1970). ↑

195. United States v. Wiesner, 789 F.2d 1264, 1268 (7th Cir. 1986). ↑

196. Fed. R. Civ. P. § 51(b)(3). ↑

197. United States. v. Venerable, 807 F.2d 745, 747 (8th Cir. 1986). ↑

198. United States v. Gray, 199 F.3d 547, 550 (1st Cir. 1999). ↑

199. United States v. Scott, 642 F.3d 791, 797 (9th Cir. 2011); United States v. Bassler, 651 F.2d 600, 602 n.3 (8th Cir. 1981). ↑

200. See, e.g., United States v. Darden, 70 F.3d 1507, 1537 (8th Cir. 1995) (court permitted note-taking while examining exhibits only); United States v. Porter, 764 F.2d 1, 12 (1st Cir. 1985) (court permitted note-taking only during opening statements, closing statements, and jury charge). ↑

201. United States v. Scott, 642 F.3d 791, 797 (9th Cir. 2011). ↑

202. See United States v. Rhodes, 631 F.2d 43, 45–46 (5th Cir. 1980) (“The court should also explain that the notes taken by each juror are to be used only as a convenience in refreshing that juror’s memory and that each juror should rely on his or her independent recollection of the evidence rather than be influenced by another juror’s notes.”). ↑

203. United States v. Richardson, 233 F.3d 1285, 1288–1289 (11th Cir. 2000). ↑

204. United States v. Rawlings, 522 F.3d 403, 408 (D.C. Cir. 2008); United States v. Bush, 47 F.3d 511, 514–516 (2nd Cir. 1995); DeBenedetto by DeBenedetto v. Goodyear Tire & Rubber Co., 754 F.2d 512, 516 (4th Cir. 1985). ↑

205. Perhaps the most important protection is a screening mechanism where questions are submitted to a judge and reviewed by counsel prior to the question being posed. Rawlings, 522 F.3d at 408; United States v. Collins, 226 F.3d 457, 463 (6th Cir. 2000). ↑

206. Collins, 226 F.3d at 464. ↑

207. Charlotte Cty. Develop. Co. v. Lieber, 415 F.2d 447, 448 (5th Cir. 1969). ↑

208. United States v. Balsam, 203 F.3d 72, 86 (1st Cir. 2000). ↑

209. Budoff v. Holiday Inns, Inc., 732 F.2d 1523, 1527 (6th Cir. 1984). ↑

210. United States v. Barfield Co., 359 F.2d 120, 123–24 (5th Cir. 1966). ↑

211. Dennis v. General Elec. Corp., 762 F.2d 365, 367 (4th Cir. 1985). ↑

212. Fed. R. Civ. P. 50(b). ↑

213. Exxon Shipping Co. v. Baker, 554 U.S. 471, 486, 128 S. Ct. 2605, 2617 n.5, 171 L. Ed. 2d 570 (2008). ↑

214. CFE Racing Prod., Inc. v. BMF Wheels, Inc., 793 F.3d 571, 583 (6th Cir. 2015). ↑

215. Id. (explaining that the waiver rule serves to protect litigants’ right to trial by jury, discourage courts from reweighing evidence simply because they feel the jury could have reached another result, and prevent tactical victories at the expense of substantive interest as the pre-verdict motion enables the defending party to cure defects in proof) (quoting Libbey-Owens-Ford Co. v. Ins. Co. of N. Am., 9 F.3d 422, 426 (6th Cir. 1993)). ↑

216. Bowen v. Roberson, 688 F. App’x 168, 169 (3d Cir. 2017). ↑

217. McGinnis v. Am. Home Mortg. Servicing, Inc., 817 F.3d 1241, 1254 (11th Cir. 2016). ↑

218. Bavlsik v. Gen. Motors, LLC, 870 F.3d 800, 805 (8th Cir. 2017). ↑

219. McGinnis, 817 F.3d at 1254. ↑

220. Id. ↑

221. See, e.g., Stragapede v. City of Evanston, Illinois, 865 F.3d 861, 866 (7th Cir. 2017), as amended (Aug. 8, 2017) (upholding jury verdict in favor of plaintiff for ADA violation when challenged in renewed 50(b) motion on grounds that the jury properly discounted employer’s evidence). ↑

222. Fed. R. Civ. P. 59. ↑

223. Fed. R. Civ. P. 59(b). ↑

224. Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007) (noting that federal courts are guided by the common law’s established grounds for permitting new trials). ↑

225. Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251, 61 S. Ct. 189, 85 L.Ed. 147 (1940). ↑

226. Kleinschmidt v. United States, 146 F. Supp. 253, 257 (D. Mass. 1956) (explaining that a party seeking new trial on ground of newly discovered evidence has substantial burden to explain why the evidence could not have been found by due diligence before trial). ↑

227. Gross v. FBL Fin. Servs., Inc., 588 F.3d 614, 617 (8th Cir. 2009) (granting new trial in age discrimination case where jury instruction improperly shifted the burden of persuasion on a central issue). ↑

228. Warner v. Rossignol, 538 F.2d 910, 911 (1st Cir. 1976) (counsel’s conduct in going beyond the pleadings and evidence to speculate and exaggerate the plaintiff’s injuries, despite repeated warnings from the trial judge, warranted new trial). ↑

229. See, e.g., Bavlsik v. Gen. Motors LLC, No. 4:13 CV 509 DDN, 2015 WL 4920300, at *1 (E.D. Mo. Aug. 18, 2015) (granting new trial on issue of damages and rejecting defendants’ argument that the record demonstrated a compromised verdict). ↑

230. McGinnis, 817 F.3d at 1254. ↑

231. Fed. R. Civ. P. 59(d). ↑

232. Fed. R. Civ. P. 50(b). ↑

233. In re Transtexas Gas Corp., (5th Cir 2002), 303 F.3d 571. ↑

234. U.S. v. Mansion House Center North Redevelopment Co., (8th Cir. 1988), 855 F.2d 524, certiorari denied 109 S. Ct. 557, 488 U.S. 993, 102 L.Ed.2d 583 (district court had jurisdiction to modify judgment, even after it was affirmed on appeal, in order to clarify its intentions and conform judgment to parties’ pretrial stipulation). ↑

235. See United States v. Cirami, 563 F.2d 26, 33 (2d Cir. 1977). ↑

Corporate governance is central to transparency, accountability, and value creation in a global economy. Directors play a key role in guiding policy, protecting shareholders, and upholding institutional integrity. While diligent fulfillment of fiduciary duties fosters trust and sound business practices, governance failures can lead to scandals and investor skepticism.

This article compares fiduciary duties and director liability in Bolivia and the United States—jurisdictions shaped by civil law and common-law traditions, respectively. Focusing on the sociedad anónima (“S.A.”) and U.S. corporations (especially under Delaware law and the Model Business Corporation Act (“MBCA”)), this article examines statutory foundations, fiduciary responsibilities, and enforcement mechanisms. The analysis herein unfolds across legal frameworks, fiduciary duties, comparative liability, and reform-oriented conclusions.

General Legal Framework: Bolivia Versus United States

Bolivia

Bolivia operates under a civil law system based on Roman legal traditions, emphasizing codified statutes and structured legal regulation.

Constitutional Provisions

Bolivia’s constitution^[1] guarantees economic freedom (Article 47(1)) and protects business association rights (Article 52(I)). It ensures legal recognition and democratic governance of business organizations (Article 52(II)).

Commercial Code

The Bolivian Commercial Code^[2] regulates the legal relationships arising from commercial activity (Article 1). It broadly defines commercial activity, applying the term to both acts and actors (e.g., merchants, entities).^[3] Business entities (sociedades comerciales) are formed via partnerships for profit or shared risk (Article 125).

The Commercial Code establishes the types^[4] of business entities governed by the commercial code. For purposes of this article, we will focus on one specific type, the S.A., due to its similarity to the U.S. corporation.

Additional Legislation

Additional legislation includes ASFI Resolution No. 722/2012^[5] and RA/AEMP Resolution No. 099/2016^[6] (amended by No. 025/2017).^[7] ASFI Resolution No. 722/201 sets corporate governance standards for financial entities, promoting transparency, accountability, and stakeholder protection. RA/AEMP Resolution No. 099/2016 governs commercial companies’ internal management, enhancing shareholder rights and corporate responsibility, with amendments ensuring alignment with the Commercial Code.

United States

The United States follows a common-law tradition, where judicial precedent and statutes coevolve through case law. Corporate law is primarily state based,^[8] with Delaware leading due to its specialized courts and rich jurisprudence. Public companies also face federal oversight, notably by the U.S. Securities and Exchange Commission (“SEC”) under statutes such as the Sarbanes-Oxley Act of 2002 (“SOX”).^[9]

State Corporate Law: Delaware and the MBCA

Corporate governance is mainly regulated at the state level. Delaware’s General Corporation Law (“DGCL”) governs many large corporations and codifies director authority, shareholder rights, and protections such as the business judgment rule.^[10] Landmark cases like Guth v. Loft^[11] and Smith v. Van Gorkom^[12] define fiduciary standards.

Many states follow the MBCA, which standardizes principles such as the duties of care and good faith (MBCA section 8.30).

Federal Regulation: Sarbanes-Oxley Act (2002)

Federal law complements state governance for publicly traded corporations. Enacted after major accounting scandals, SOX enhances financial transparency and accountability.^[13] Key features include CEO/CFO certification (section 302), internal control disclosures (section 404), and the Public Company Accounting Oversight Board (“PCAOB”) for auditor oversight.^[14] It also provides whistleblower protections and criminal penalties for fraud.

Fiduciary Duties and Judicial Enforcement

Directors owe fiduciary duties of care and loyalty,^[15] typically reviewed under the business judgment rule.^[16] In conflict scenarios, Delaware courts may apply the “entire fairness” standard, demanding fair dealing and fair price.^[17]

Shareholders enforce these duties through derivative suits, especially in closely held corporations. Federal securities laws add enforcement layers for public disclosures and fraud.^[18]

Overview of the Bolivian Corporation: Sociedad Anónima

The S.A. is Bolivia’s most common corporate structure. It is a separate legal entity composed of shareholders with limited liability, meaning that each shareholder is only liable up to its capital contribution.

Incorporation

The S.A. is formed by a partnership agreement (acta de fundación), with legal effect triggered upon registration with the Commercial Registry (Article 133). Founding partners are jointly responsible for formalizing incorporation, and the business name must reflect its purpose and include the term S.A.

Structure

The structure is as follows:

1. Formation: The S.A. may be closely held or publicly traded. It requires a minimum of three shareholders (Article 220(1)); no maximum cap applies.
2. Capital: Capital is represented by shares. Contributions may include money; personal or real property (Article 150); rights (Article 152); credits (Article 153); or securities (Article 157)—though “use rights” (Article 155) and labor (Article 156) are excluded.
3. Shares: Shares are transferable via endorsement and registration.
4. Management: A board of directors (three to twelve members) holds nondelegable authority (Article 295). Meetings may be held virtually or abroad, but voting by mail is prohibited.
5. Legal Representation: Legal representation is held by the chair or delegated to another director or third party, who must be a Bolivian national or legal resident.
6. Shareholders’ Meetings: Shareholders’ meetings are convened as ordinary or extraordinary meetings per statutory guidelines (Articles 278–293).

Role of Directors

Bolivia

In the Bolivian S.A., the board of directors leads corporate policy and oversight, serving as a bridge between management and shareholders. The system integrates an assembly-based body, ensuring shareholder engagement, alongside the board of directors, which executes the company’s corporate objectives.^[19] It comprises three to twelve members, who are elected and removable by the ordinary general meeting. Directors may be shareholders or independent appointees.

The board of directors exercises the corporation’s legal representation before third parties with whom the corporation enters into contracts, acquires rights, and assumes obligations.^[20] While the board of directors constitutes the administrative organ of the corporation, it may delegate administrative duties to a management body charged with executing the corporation’s operations. These officers are considered to be corporate managers and representatives of the corporation with express powers established in a notarized and recorded power of attorney.

United States

In the United States, corporate directors play a crucial role in governance, balancing oversight responsibilities with strategic decision-making. Corporate executives handle the day-to-day management of the corporation, while the board of directors, mandated by law, oversees and monitors their decisions to ensure alignment with corporate objectives and shareholder interests.^[21]

The board’s key responsibilities include the following:

1. Fiduciary Responsibilities: Directors owe duties of care and loyalty to the corporation and its shareholders. The duty of care requires informed and prudent decision-making, while the duty of loyalty mandates that directors prioritize the corporation’s interests over personal gain.^[22]
2. Strategic Oversight: Directors help shape the corporation’s long-term vision, advising management on key business strategies and ensuring alignment with shareholder interests.^[23]
3. Risk Management: Boards are responsible for identifying and mitigating risks, including financial, operational, and regulatory risks. They establish internal controls and compliance mechanisms to safeguard the corporation.^[24]
4. Executive Supervision: Directors oversee senior management, including hiring and evaluating the CEO. They ensure leadership accountability and may intervene in cases of misconduct or poor performance.^[25]
5. Regulatory Compliance: Boards ensure adherence to corporate laws, stock exchange requirements, and industry regulations. In publicly traded corporations, they also oversee financial disclosures and compliance with SEC regulations.^[26]
6. Shareholder Representation: Directors act as intermediaries between shareholders and management, ensuring transparency and responsiveness to investor concerns.^[27]

Fiduciary Duties: Bolivia Versus United States

Bolivia

Duty of Diligence and Duty of Loyalty

Bolivian corporate law imposes duties of diligence, prudence, and loyalty on directors (Article 164). These broad standards lack precise judicial interpretation,^[28] making enforcement reliant on administrative regulations like ASFI Resolution No. 722/2012^[29] and RA/AEMP Resolution No. 099/2016^[30] (amended by No. 025/2017^[31]).

Based on this framework, the following principles emerge:

• Diligence (deber de diligencia) demands informed, responsible decision-making aligned with legal norms.
• Loyalty (deber de lealtad) requires prioritizing the corporation’s interests, avoiding conflicts, personal gain, and misuse of confidential information.

Conflicts of Interest

While the Commercial Code does not define conflicts of interest, Securities Law 1834 (Article 103) provides a regulatory definition: any act yielding illegitimate advantage through the use of information, provision of services, or transactions in the securities market.

Though grounded in securities regulation, this rule underscores core fiduciary duties—especially loyalty—by targeting misuse of information and corporate opportunities. It serves as a broader standard for managing conflicts of interest and reinforces that directors must avoid compromising their judgment or the corporation’s integrity.

Expanding on this principle, RA/AEMP Resolution No. 025/2017 (Article 24) outlines a structured approach to managing conflicts of interest. It mandates disclosure within five days and bars conflicted parties from voting, ensuring transparency and fair governance.

Board Independence

A Bolivian S.A. board is not required to include independent directors, but shareholders may choose to do so. Independent directors play a critical role in corporate governance worldwide, mitigating undue influence and ensuring impartial decision-making at the board level. Independent directors are appointed based on their professional reputation and lack of ties to the corporation’s management or principal shareholders.^[32]

In Bolivia, Article 17 of RA/AEMP Resolution No. 025/2017 allows voluntary declarations of director affiliations to assess impartiality. Although nonbinding, this tool supports independent oversight and could strengthen confidence if made mandatory.

United States

In the United States, corporate boards fulfill two key roles: advisory and oversight. In the advisory role, the board of directors consults with management on strategic and operational matters, while in the oversight role, it monitors management to ensure compliance with legal duties and alignment with shareholder interests.^[33] Directors ultimately bear responsibility for managing the corporation’s affairs and, in doing so, owe fiduciary duties to both the corporation and its shareholders.^[34]

Fiduciary Duties: Duty of Care and Duty of Loyalty

In the United States, corporate law mandates that the board of directors comply with the principle of fiduciary duty, which, in effect, means that the directors have a legal obligation to act in the interests of the corporation.^[35]

U.S. corporate law, especially under Delaware law, recognizes two primary fiduciary duties: the duty of care and the duty of loyalty. These duties are accompanied by related obligations, including the duty of candor (or disclosure), the duty to monitor, and the duty of obedience. The duty of candor, also known as the duty to disclose, is inherent in both the duty of loyalty and the duty of care; this duty requires directors to ensure that the information provided to shareholders is both materially complete and accurate.^[36] The duty to monitor, often referred to as the Caremark duty,^[37] obligates directors to implement and oversee internal controls that enable informed and lawful corporate decision-making. Under this duty, directors are required to implement information and reporting systems that are reasonably designed to provide timely and accurate information. This is essential for enabling management and the board of directors to make informed decisions.^[38]

Delaware courts have expanded these obligations in cases such as Marchand v. Barnhill^[39] and In re Clovis Oncology, Inc. Derivative Litigation,^[40] emphasizing that directors of monoline companies in highly regulated industries face heightened oversight responsibilities.^[41] Courts consider whether directors failed to establish systems to ensure legal compliance, and they assess liability accordingly.^[42]

Duty of Care

The traditional formulation of a director’s duty of care uses a “reasonably prudent man” standard quite like that of tort law.^[43] It is a fundamental principle that requires a director to exercise the degree of care that an “ordinarily careful and prudent man would use in similar circumstances.”^[44] This standard enables shareholders and courts to hold directors accountable for negligent or uninformed decisions.^[45] A breach typically requires a showing of gross negligence.

The duty of care is reinforced by the obligation to act in good faith, honestly, diligently, and in compliance with the corporation’s legal and ethical obligations.^[46] This duty of care overlaps with the duty of obedience, which obliges directors to ensure that the corporation operates within the bounds of its governing documents and applicable laws.^[47]

The duty of candor, as a component of the duty of care, obliges directors to disclose all material facts truthfully and completely. A failure to do so, whether through negligence or omission, may constitute a breach of fiduciary duty, especially in contexts involving shareholder communications or major corporate transactions.^[48]

Duty of Loyalty

The duty of loyalty is primarily governed by state corporate law, with Delaware law being particularly influential due to its prominence in corporate governance.^[49] Courts apply different standards of review, including the entire fairness standard, which requires directors to prove that a transaction was fair in both price and process.^[50]

The duty of loyalty mandates that directors prioritize the corporation’s interests over their own and avoid conflicts of interest, misappropriation of corporate opportunities, and insider trading.^[51] Directors must act in good faith, with integrity, and without using their position for personal gain.^[52] The duty of loyalty essentially prohibits self-dealing, such as entering self-interested transactions, and requires that directors act solely in the corporation’s best interests.^[53]

Board Independence

In the United States, board independence is a cornerstone of effective corporate governance. To fulfill their advisory and oversight responsibilities, directors must be able to exercise objective judgment without undue influence from management.^[54] Independence ensures that directors can critically assess corporate strategy, risk exposure, and executive performance—and, when necessary, oppose decisions or actions taken by management that may not serve the best interests of shareholders.^[55] This is especially crucial in contexts involving potential conflicts of interest, such as related-party transactions or executive compensation decisions.

Various regulatory and listing standards, including those promulgated by the New York Stock Exchange (“NYSE”) and Nasdaq, require that a majority of board members in publicly traded corporations be independent, as defined by criteria that evaluate financial, familial, and business relationships with the corporation and its executives.^[56] Such requirements are designed to enhance transparency, promote accountability, and preserve the integrity of board deliberations.

In privately held corporations, board independence is not mandated by statute or listing standards, as is the case for publicly traded entities governed by rules such as NYSE § 303A.02 or Nasdaq Rule 5605.^[57] However, while there is no formal legal requirement under state corporate law for private companies to appoint independent directors, their presence can mitigate agency costs and reduce the risk of self-dealing, especially in contexts involving related-party transactions or succession planning.^[58] Moreover, venture capital and private equity firms often contractually require independent or investor-appointed directors as a condition of investment, reflecting the practical importance of independence even outside public markets.^[59]

Board Liability: Bolivia Versus United States

Bolivia

In the Bolivian S.A., directors and managers form a unified administrative body and share joint and unlimited liability for harm caused by misconduct or negligence (Articles 163–68, 321).^[60]

This is explained by the fact that in such corporations, where the board of directors is the governing body, the administrators include both the board members themselves and the managers whom they appoint and empower. Since managers are appointed by the board, they act on its behalf, creating a unified administrative body where both directors and managers are jointly and unlimitedly liable.^[61]

Article 164^[62] establishes the fiduciary duties and corresponding liability of corporate administrators^[63] and legal representatives, such as directors, mandating that they act with diligence, prudence, and loyalty in the exercise of their functions. This provision imposes a high standard of conduct, ensuring that those in management positions prioritize the interests of the company and its stakeholders. Failure to adhere to these duties, whether through wrongful acts or negligent omissions, can result in joint and unlimited liability for any damages caused. This means that each responsible individual can be held fully accountable for the entire amount of harm, with no limitation on personal financial exposure.

Article 163 grants broad powers to the board of directors and appointed managers to act on behalf of the corporation, as long as their actions comply with the corporate charter and the law.^[64] The corporation is bound by these actions provided that they are not clearly unrelated to the corporation’s purpose.^[65] If directors or managers exceed the scope of the corporate charter, legal authority, or applicable law, they bear personal liability, meaning that they must answer for these actions with their own assets.^[66]

This principle of personal liability is particularly relevant in dealings with third parties. For example, Article 166 states that administrators and representatives are jointly and unlimitedly liable for any willful misconduct committed in the name of the corporation.^[67] Article 166 serves as a protective measure for third parties dealing with the corporation, ensuring that intentional misconduct by corporate officials does not go unpunished and cannot be shielded behind the corporate entity.

In addition to liability for misconduct, directors are also accountable for financial mismanagement, particularly regarding unlawful profit distributions under Article 168. This provision allows both the corporation and its creditors to seek restitution for distributions made in violation of the law. Those who received improper distributions, along with the board members who approved them, share joint responsibility and may be required to reimburse the corporation.^[68] By enforcing these measures, the law aims to safeguard corporate capital and protect third-party creditors from financial instability caused by unauthorized asset depletion.

Beyond liability for unlawful profit distributions, directors are also subject to broader fiduciary accountability under Article 321 of the Bolivian Commercial Code. This provision establishes joint and unlimited liability for directors of an S.A. in relation to the corporation, its shareholders, and third parties. Specifically, directors may be held accountable for (1) mismanagement of their duties; (2) violations of applicable laws, bylaws, or shareholder resolutions; (3) damages resulting from gross negligence, deceit, fraud, or abuse of authority; and (4) unauthorized profit distributions.^[69] By outlining an extensive fiduciary framework, Article 321 reinforces corporate accountability beyond internal governance, ensuring that directors remain answerable to both shareholders and external stakeholders.

This framework prioritizes transparency and ethical leadership, with liability serving as both a deterrent and a corrective tool for governance lapses.

United States: Delaware and the MBCA

In the United States, directors of corporations are subject to fiduciary duties rooted in common-law principles and codified in state statutes, most notably those of Delaware,^[70] and the MBCA.^[71] The legal framework governing directors emphasizes limited liability but imposes personal responsibility for breaches of fiduciary duties, violations of statutory distribution rules, and misconduct falling outside the protections of the business judgment rule.

Under Delaware law, corporate directors owe two core fiduciary duties: the duty of care and the duty of loyalty.^[72] The duty of care requires directors to act on an informed basis and with the care that an ordinarily prudent person would exercise in similar circumstances.^[73] In contrast, the duty of loyalty mandates that directors act in the best interests of the corporation and avoid conflicts of interest, self-dealing, or usurpation of corporate opportunities.^[74] Delaware courts evaluate director conduct under the business judgment rule, a presumption that directors acted in good faith, on an informed basis, and in the best interest of the corporation.^[75] This presumption can be rebutted by evidence of gross negligence, bad faith, or disloyalty.^[76]

The MBCA largely mirrors Delaware’s structure but provides more detailed statutory guidance. Section 8.30 of the MBCA codifies the standards of conduct for directors, requiring good faith, the care of an ordinarily prudent person, and a reasonable belief that the action is in the corporation’s best interests.^[77] Section 8.31 establishes liability when directors breach those duties and cause harm to the corporation or its shareholders.^[78]

Directors may also be held liable under DGCL § 174, which imposes liability for unlawful dividends or other distributions of capital.^[79] However, this liability is subject to a negligence standard and provides for a good-faith defense, unlike the Bolivian regime, which imposes joint and unlimited liability. Shareholders who knowingly receive unlawful distributions may also be required to return them, although the standard is generally less strict than in Bolivian law.^[80]

Moreover, under DGCL § 102(b)(7), Delaware permits corporations to adopt charter provisions eliminating directors’ personal liability for breaches of the duty of care.^[81] However, this exculpation does not extend to breaches of the duty of loyalty, acts not in good faith, or intentional misconduct.^[82] This limitation preserves the accountability of directors in the most egregious cases while providing protection for business judgment exercised in good faith. In cases involving fraud or self-dealing, Delaware courts apply the entire fairness doctrine, shifting the burden to directors to prove both fair dealing and fair price.^[83] This equitable doctrine ensures heightened scrutiny when conflicts of interest exist, particularly in closely held or controlled corporations.

Conclusion: Comparative Analysis

Comparative Analysis of Fiduciary Duties: Bolivia Versus United States

Bolivia and the United States share fundamental fiduciary principles, yet diverge significantly in legal structure, enforcement mechanisms, and doctrinal development. While both systems recognize the core duties of care and loyalty, their governance models reflect distinct regulatory philosophies shaped by civil law and common-law traditions, respectively.

In Bolivia, these fiduciary duties are grounded primarily in Article 164 of the Bolivian Commercial Code, which imposes on directors the obligation to act with diligencia, prudencia, and lealtad, under penalty of joint and several liability for harm resulting from their acts or omissions.^[84] This standard is further developed in RA/AEMP Resolution No. 099/2016, which applies to a range of corporate forms and mandates performance of duties with loyalty, confidentiality, and the prudence of a diligent businessperson.^[85] However, Bolivian commercial jurisprudence has yet to establish consistent interpretations of these terms, and statutory guidance remains broad in scope. Complementary regulations, such as RA/AEMP No. 025/2017 and ASFI Resolution No. 722/2012, attempt to refine the scope of fiduciary obligations and conflicts of interest;^[86] but many provisions, such as declarations of independence, remain discretionary, indicating a framework still in regulatory transition.

In contrast, the fiduciary regime in the United States, particularly as developed under Delaware corporate law, is characterized by doctrinal precision, extensive case law, and enforceability. The duty of care requires directors to act with the level of prudence that a reasonably careful person would use in similar circumstances.^[87]

Failures in oversight may result in liability under the Caremark doctrine, which obligates directors to establish and monitor adequate reporting systems.^[88] The duty of loyalty prohibits self-dealing and demands that directors place the corporation’s interests above their own, with violations subject to heightened judicial scrutiny under the entire fairness standard.^[89]

Additionally, duties such as the duty of candor, requiring full and truthful disclosure of material information, and the duty of good faith, reinforcing honest decision-making, have evolved through judicial interpretation.^[90] Together, these doctrines are bolstered by well-developed litigation standards, such as the business judgment rule, which defers to directors’ decisions absent gross negligence or bad faith.

This comparison highlights how similar fiduciary concepts are operationalized differently across civil law and common-law traditions. Bolivia’s evolving framework seeks to institutionalize global governance norms within a regulatory model still reliant on administrative resolutions. The United States, by contrast, leverages a robust body of jurisprudence and institutional accountability, particularly in Delaware, to clarify and enforce fiduciary obligations and adapt them to changing economic realities.

Going forward, Bolivia’s corporate governance system may benefit from enhanced judicial engagement, more precise statutory definitions, and stronger enforcement tools. Meanwhile, developments in U.S. law, particularly in areas such as environmental, social, and governance (“ESG”) oversight, cybersecurity governance, and shareholder activism, continue to stretch the contours of traditional fiduciary obligations.

Despite their differences, both frameworks seek to balance corporate authority with accountability. Bolivia’s structured liability model emphasizes deterrence and stakeholder protection, while the U.S. system prioritizes adaptability and judicial oversight. Understanding these distinctions offers valuable insights into global governance trends and potential reforms to strengthen corporate accountability across jurisdictions.

Comparative Analysis of Director Liability for Fiduciary Breaches: Bolivia Versus United States

Director liability for fiduciary breaches in Bolivia and the United States reflects two distinct governance models—Bolivia’s civil law framework, which emphasizes formal compliance and broad accountability, and the U.S. common-law system, which prioritizes judicial discretion and director autonomy. While both systems share the overarching goal of promoting responsible corporate management and protecting stakeholder interests, they diverge significantly in their approach to director liability, the scope of fiduciary duties, and the mechanisms for enforcement.

Bolivia’s Commercial Code enforces a strict and formal approach to director liability. Directors and managers of an S.A. are subject to a regime of joint and unlimited liability for breaches of duty, statutory violations, unauthorized distributions, and acts of gross negligence or fraud. The Code imposes this liability not only vis-à-vis the corporation and its shareholders but also in relation to third parties, underscoring the protective function of Bolivian corporate law toward creditors and the broader public. This civil law orientation prioritizes legal certainty, deterrence, and stakeholder safeguards over managerial discretion.

In contrast, the U.S. framework, especially under Delaware law and the MBCA, emphasizes director independence, business judgment deference, and limited liability, unless clear breaches of fiduciary duty are demonstrated. The duties of care and loyalty form the foundation of this system, with liability narrowly tailored to situations involving bad faith, gross negligence, or disloyal conduct. Delaware’s business judgment rule and statutory exculpation provisions (e.g., DGCL § 102(b)(7)) provide directors with considerable latitude to make informed, good-faith decisions without fear of personal exposure. Even in cases of unlawful distributions, liability under DGCL § 174 is subject to a good-faith defense and limited to directors who acted negligently or without reasonable reliance on financial statements.

Notably, Bolivia neither provides a general presumption of good faith nor permits contractual exculpation of directors from fiduciary liability. The Bolivian system therefore imposes stricter accountability ex ante, while the U.S. model relies on judicial review and litigation ex post to sanction misconduct. Moreover, while Bolivia’s law treats the board and management as a unified administrative organ, U.S. corporate law draws a sharper distinction between the board’s oversight role and the executives’ operational responsibilities, reinforced by governance norms such as board independence and committee structure.

Overall Comparison

In sum, Bolivia’s fiduciary regime favors formal compliance, collective responsibility, and protective liability doctrines, while the U.S. regime favors flexibility, delegation, and calibrated enforcement. These governance models reflect broader legal traditions. Bolivia’s approach prioritizes preventative oversight and collective accountability, while the U.S. system favors judicial evaluation and individualized director responsibility. These differences offer valuable insights for comparative corporate governance studies, particularly in evaluating how legal systems incentivize integrity, prudence, and fairness in corporate leadership.

1. Political Constitution of the Plurinational State of Bolivia, Feb. 7, 2009 (Bol.). ↑

2. Bolivian Com. Code, Decreto Ley No. 14379 (Feb. 25, 1977) (Bol.). ↑

3. Id. art. 5(2) (stating that legal entities are also considered merchants (comerciantes)). The term commercial is not used in a strict sense, but rather the Code provides a generic notion that encompasses commercial activities (objective) and the subject that performs the acts (subjective). ↑

4. Id. art. 126. ↑

5. Resolución Administrativa ASFI No. 722/2012, Titulo IX, Capitulo XX, Sección I, Autoridad de Supervisión del Sistema Financiero (Dec. 14, 2012) (Bol.). ↑

6. Resolución Administrativa RA/AEMP No. 099/2016, Autoridad de Fiscalización de Empresas (Dec. 30, 2016) (Bol.). ↑

7. Resolución Administrativa RA/AEMP No. 025/2017, Autoridad de Fiscalización de Empresas (Apr. 12, 2017) (Bol.). ↑

8. Understanding the Rigors of Corporate Law in the United States, Rey Abogado (May 29, 2025). ↑

9. For an explanation of the Sarbanes-Oxley Act, see Sarbanes-Oxley Act, Legal Info. Inst. (last visited May 29, 2025). ↑

10. Del. Code Ann. tit. 8, § 141(a) (2024) (conferring management authority on the board of directors). ↑

11. Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939) (articulating the foundational principles of the duty of loyalty). ↑

12. Smith v. Van Gorkom, 488 A.2d 858, 873–81 (Del. 1985) (holding directors liable for breach of the duty of care due to uninformed decision-making). ↑

13. Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (codified in scattered sections of 15 U.S.C. and 18 U.S.C.). ↑

14. 15 U.S.C. § 7241 (2022) (sec. 302); 15 U.S.C. § 7262 (2022) (sec. 404); 15 U.S.C. § 7211 (2022) (establishing PCAOB). ↑

15. See Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006) (clarifying oversight duties as part of the duty of loyalty). ↑

16. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000). ↑

17. Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983). ↑

18. See 15 U.S.C. § 78j(b) (2022); 17 C.F.R. § 240.10b-5 (2022) (prohibiting fraudulent practices under the Securities Exchange Act of 1934). ↑

19. Fernando E. Miranda Mendoza, Gobierno Corporativo en Bolivia: Conflicto de Intereses en los Directores de Sociedades Comerciales 35 (2016). ↑

20. Sarah B. Mendoza, Responsabilidad de los Directores en las Sociedades Anónimas: Es usted Director de una Sociedad Anónima?, Mondaq (May 14, 2012). ↑

21. Paul P. Brountas, Boardroom Excellence: A Common Sense Perspective on Corporate Governance 42 (2004). ↑

22. Dan Byrne, Board Responsibilities: A Practical Guide for Directors, Corp. Governance Inst. (last visited May 20, 2025). ↑

23. Id.; see also Howard Brod Brownstein, Board Oversight of Corporate Compliance, Bus. L. Today (Oct. 12, 2021). ↑

24. Byrne, supra note 22. ↑

25. Holly J. Gregory, Rebecca Grapsas & Claire H. Holland, Corporate Governance and Directors’ Duties in the United States: Overview, Stan. L. Sch. (2023). ↑

26. Aaron Hall, Legal Framework for Board Oversight of Corporate Governance Practices, Aaron Hall Att’y (last visited May 20, 2025). ↑

27. Dirs.’ Inst., Independent Directors and Investor Relations—Building Trust and Transparency with Shareholders, Dirs.’ Inst. (Dec. 10, 2024). ↑

28. Juan Carlos Urenda Díaz, Manual de la Responsabilidad de los Gerentes, Directores y Síndicos 22 (Plural ed., 2012). ↑

29. Article 7 sets out the duties of loyalty and diligence that must be observed by members of the board of directors, senior management, and other governing bodies of financial institutions. ↑

30. RA/AEMP Resolution No. 099/2016 established the corporate governance regulation for commercial companies in Bolivia. This regulation introduced mandatory compliance provisions for corporations, limited liability companies, and other types of business entities. Although it was partially amended by RA/AEMP Resolution No. 025/2017, the core duties of directors and administrators remained unchanged. ↑

31. Article 18 establishes that the powers and responsibilities of directors must be carried out with loyalty, confidentiality, and the diligence of a prudent businessperson. ↑

32. Julio Vicente Flores Konja & Alan Errol Rozas Flores, El Gobierno Corporativo: Un Enfoque Moderno, 15 Quipukamayoc 7 (2008). ↑

33. David Larcker & Brian Tayan, Corporate Governance Matters: A Closer Look at Organizational Choices and their Consequences 57 (2d ed. 2016). ↑

34. Myron M. Sheinfeld & Judy Harris Pippitt, Fiduciary Duties of Directors of a Corporation in the Vicinity of Insolvency and After Initiation of a Bankruptcy Case, 60 Bus. Law. 79 (2004). ↑

35. Joseph Hinsey IV, Business Judgment and the American Law Institute’s Corporate Governance Project: The Rule, the Doctrine, and the Reality, 52 Geo. Wash. L. Rev. 609, 609–10 (1984). ↑

36. Brountas, supra note 21, at 26. ↑

37. The Caremark duties stem from the landmark case In re Caremark International Inc. Derivative Litigation, which established a director’s duty of oversight. In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996). ↑

38. Holger Spamann, Scott Hirst & Gabriel Rauterberg, Corporations in 100 Pages 45 (3d ed. 2022). ↑

39. Marchand v. Barnhill, 212 A.3d 805 (Del. 2019). ↑

40. In re Clovis Oncology, Inc. Derivative Litig., 2019 WL 4850188 (Del. Ch. Oct. 1, 2019). ↑

41. Katherine M. King, Marchand v. Barnhill’s Impact on the Duty of Oversight: New Factors to Assess Directors’ Liability for Breaching the Duty of Oversight, 62 B.C. L. Rev. 1925 (2021). ↑

42. See Marchand, 212 A.3d at 810, 824 (relying on Blue Bell’s monoline business and the significance of complying with FDA regulations as factors in finding a well-pled Caremark claim); In re Clovis, 2019 WL 4850188, at *1 (explaining the importance of the directors’ duty of oversight as “especially so when a monoline company operates in a highly regulated industry”); King, supra note 41 (discussing the issue). ↑

43. Charles Hansen, The Duty of Care, the Business Judgment Rule, and the American Law Institute Corporate Governance Project, 48 Bus. Law. 1355 (1993). ↑

44. Sheinfeld & Pippitt, supra note 34. ↑

45. Thomas C. Lee, Limiting Corporate Directors’ Liability: Delaware’s Section 102(b)(7) and the Erosion of the Directors’ Duty of Care, 136 U. Pa. L. Rev. 239 (1987). ↑

46. Lee Harris, Mastering Corporations and Other Business Entities 136 (Carolina Academic Press 2009). ↑

47. Larcker & Tayan, supra note 33, at 68. ↑

48. Id. ↑

49. Prac. L. Corp. & Sec., Fiduciary Duties of the Board of Directors (Jan. 2023). ↑

50. Id. ↑

51. E. Norman Veasey, Duty of Loyalty: The Criticality of the Counselor’s Role, 45 Bus. Law. 2066 (1990); Harris, supra note 46, at 162. ↑

52. John Lowry, The Duty of Loyalty of Company Directors: Bridging the Accountability Gap Through Efficient Disclosure, 68 Cambridge L.J. 607 (2009). ↑

53. Harris, supra note 46, at 169. ↑

54. Larcker & Tayan, supra note 33, at 58. ↑

55. Id. ↑

56. NYSE Listed Company Manual § 303A.02 (defining independence); Nasdaq Rule 5605(a)(2); see also In re Oracle Corp. Derivative Litig., 824 A.2d 917, 938–39 (Del. Ch. 2003) (discussing the nuance of independence beyond formal relationships). ↑

57. NYSE Listed Company Manual § 303A.02 (defining independence for listed companies); Nasdaq Rule 5605(a)(2). ↑

58. See Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of Corporate Law 90–92 (1991) (discussing agency costs and the role of boards in minimizing them). ↑

59. See Jesse M. Fried & Mira Ganor, Agency Costs of Venture Capitalist Control in Startups, 81 N.Y.U. L. Rev. 967, 984–85 (2006) (noting governance mechanisms in venture-capitalist-backed firms, including board composition requirements). ↑

60. Díaz, supra note 28, at 25. ↑

61. Id. ↑

62. Bolivian Com. Code, Decreto Ley No. 14379, art. 164 (Feb. 25, 1977) (Bol.). ↑

63. See id. art. 307 (noting that the term administrator refers to a Bolivian corporation’s board of directors and that corporate management must be entrusted to a board of at least three directors). ↑

64. Id. art. 163. ↑

65. Id. ↑

66. Díaz, supra note 28. ↑

67. Bolivian Com. Code art. 166. ↑

68. Id. art. 168. ↑

69. Id. art. 321. ↑

70. Del. Code Ann. tit. 8 (2024). ↑

71. Model Bus. Corp. Act § 8.30 (Am. Bar Ass’n 2021). ↑

72. Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939); see also Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006). ↑

73. Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985). ↑

74. Guth, 5 A.2d at 510. ↑

75. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984). ↑

76. In re Walt Disney Co. Derivative Litig., 906 A.2d 27, 52–53 (Del. 2006). ↑

77. Model Bus. Corp. Act § 8.30 (Am. Bar Ass’n 2021). ↑

78. Id. § 8.31. ↑

79. Del. Code Ann. tit. 8, § 174 (2023). ↑

80. Id.; see also Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 371 (Del. 1993). ↑

81. Del. Code Ann. tit. 8, § 102(b)(7). ↑

82. Malpiede v. Townson, 780 A.2d 1075, 1095–96 (Del. 2001). ↑

83. Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del. 1983). ↑

84. Bolivian Com. Code, Decreto Ley No. 14379, art. 164 (Feb. 25, 1977) (Bol.) ↑

85. Reglamento de Gobierno Corporativo para Sociedades Comerciales, Resolución Administrativa RA/AEMP No. 099/2016, Autoridad de Fiscalización de Empresas, art. 18 (Dec. 30, 2016) (Bol.). ↑

86. Resolución Administrativa RA/AEMP No. 025/2017, Autoridad de Fiscalización de Empresas, arts. 17, 24 (Apr. 12, 2017) (Bol.); Resolución Administrativa ASFI No. 722/2012, Autoridad de Fiscalización de Empresas, art. 7 (Dec. 14, 2012) (Bol.). ↑

87. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984); see also Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985). ↑

88. In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959, 970 (Del. Ch. 1996). ↑

89. Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del. 1983). ↑

90. See Malpiede v. Townson, 780 A.2d 1075, 1085–87 (Del. 2001); Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006). ↑

This is the eighth installment in the Year in Governance Series from the In-House Subcommittee of the ABA Business Law Section’s Corporate Governance Committee. Each month, the series will share key tips on a different corporate governance topic. To get involved in the Corporate Governance Committee, please visit the committee’s webpage.

A message from Kathy Jaffari: “As Chair of the Corporate Governance Committee, I would like to extend my sincere appreciation to the authors for this publication. The Corporate Governance Committee has ongoing opportunities for writing and volunteering with various projects, whether it’s an article you want to publish or a CLE that you want to present. Our Committee is dedicated to helping you promote informative resources for corporate governance practitioners. You may contact me at [email protected] to get involved.”

Corporate directors play an essential role in the success of a company. Because they meet only periodically, it is important that directors and the board of directors as a whole conduct themselves in a manner that best serves the company and makes each meeting impactful. The “soft skills” demonstrated by directors can have a critical impact on the functioning of the board.

1. Be prepared. To meet their duty of care, directors need to show up at meetings and be fully prepared to discuss the topics on the agenda. If a meeting is in person, they should attend in person absent extenuating circumstances. Before the meeting, they must carefully read (not just skim) the pre-meeting materials and give thoughtful consideration to what decisions need to be made, what questions need to be addressed, or what additional information they may need to understand each topic.
2. Be curious. Directors need to read the materials and listen to presentations and discussion with an open mind. They should apply critical judgment to what is presented—management will emphasize what they want directors to take away, but management’s perspective might be limited. The value of directors is that they bring outside perspectives, enabling them to ask questions and challenge management’s assumptions. A director’s value is often demonstrated by the quality of their questions.
3. Noses in, fingers out. The role of board members is to oversee the company; it is not to roll up their sleeves and operate the company or make tactical decisions. Directors must hold themselves and one another accountable for keeping the dialogue at the right level, lest the line between management and the board become blurred.
4. Grow in the role. Directors are often nominated for their particular experience or expertise. But directors are responsible for oversight of the entire enterprise, not just their areas of expertise. By the same token, directors should not simply defer to the “expert” on the board; rather, all directors should inform themselves on matters for consideration, ask questions to seek understanding, and apply their own judgment. This way, decisions made by the board have the benefit of the full board’s wisdom and perspective.
5. Stay on task. Time is the most precious nonrenewable resource for a board. Directors must avoid discussion detours that don’t advance the meeting’s goals. Directors should seek clarity of objectives (e.g., whether an agenda item is informational or for decision) and be aware of the entirety of the agenda so that a particular item does not consume undue time or attention. An effective chair or lead director will facilitate appropriate allocation of time during a meeting by making sure all necessary items are addressed and that discussions stay on point.
6. Show courtesy and respect. A board needs to work as a team. Particularly when the company faces challenges, it is critical that directors be laser-focused on addressing those problems and not distracted by interpersonal conflict. Remember that each person was nominated for their expertise and experience. All directors should aim to foster an environment that enables each director to bring that value to the table, building trust and camaraderie. While doing so, they should keep in mind that courtesy and respect do not mean blind deference or keeping quiet when a point needs to be challenged.
7. Keep it in the boardroom. Directors must honor the confidentiality of what is shared with the board—both the materials and the discussion of topics. Recognize that investors, activists, and the media are always keen for more information that they can use to their advantage, and they might use various tactics to try to pry confidential information from directors. A leak erodes trust among directors and can seriously impair the effectiveness of the board. To minimize risk, any notes taken should be destroyed so that minutes are the only record of the meeting. Exercise caution when considering the use of recording devices or artificial intelligence for minutes or summaries, as these can be leak vectors.
8. Identify and manage conflicts. To meet their fiduciary duty of loyalty, directors must not act in conflict with the interests of the company. Directors should be mindful of their investments and the activities of their other associations and proactively bring to the attention of the company any issues that might present a conflict of interest. Doing this allows the director and the company to take precautionary measures such as raising awareness, recusing the director if needed, and documenting the action taken in minutes.
9. Challenge constructively. Directors should focus on discussing the matters at hand without emotion, and with an objective of resolving issues, not just criticizing. When a director disagrees with the direction taken, the disagreement should be addressed constructively (and recorded in the minutes if appropriate) and in a way that serves the best interests of the company. If it is appropriate for a director to resign because of a disagreement, the director and the board should seek to agree on a manner of disclosure that best serves the interests of the company.
10. Design board operations for success. Directors have responsibilities beyond their particular areas of expertise. To unlock the full value of directors, they should be encouraged and enabled to rotate committees and to attend any committee meetings. It is a good practice to assign mentors or “board buddies” to new directors so that they are comfortable participating as quickly as possible. The chair or lead director should establish channels for individual directors to raise concerns in a way that is not disruptive and does not create a problematic trail of evidence.

The views expressed in this article are solely those of the authors and not their respective employers, firms or clients.

Digital assets^[1] are maturing. The tokenization of financial assets, the permeance of Bitcoin and Ether exchange-traded products (“ETPs”), and the rise of stablecoins exemplify how digital assets are coming of age and intersecting with traditional financial products and services.

This convergence raises significant policy, regulatory, and legal issues related to central matters such as taxonomy, custody of digital assets, and the function of market intermediaries. Specifically, what role should policymakers and regulators play when emerging technologies conflict with established regulatory frameworks that may be ill-suited for new products and services? As the legal and regulatory framework for digital assets evolves, fundamental market forces are emerging, driven by increased regulatory clarity and the development of commercially viable products and services that create efficiencies at scale.

Intersectionality of Digital Assets and Traditional Finance

The Trump administration’s pro-crypto stance has created interesting dynamics, including increased competition in the sector. The current political and regulatory environment has created an aperture for proponents of digital assets to gain access to previously inaccessible segments of the financial market and obtain legal and regulatory clarity for the industry.

On March 28, 2025, the Federal Deposit Insurance Corporation (“FDIC”) rescinded FIL-16-2022 and issued new guidance that allows FDIC-supervised institutions to engage in permissible crypto-related activities without needing prior approval from the FDIC.^[2] Also, on May 28, 2025, the U.S. Department of Labor rescinded a 2022 guidance that cautioned plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.^[3] While these developments present tremendous opportunities, they also come with trade-offs for those looking to disrupt the financial sector.

Additionally, with the Guiding and Establishing National Innovation for U.S. Stablecoins Act (“GENIUS Act”) signed into law on July 18, 2025, providing regulatory clarity to the asset class, incumbent companies and banks are positioning themselves to enter the market. Reports indicate that Meta Platform, Inc. (formerly Facebook, Inc.) is in discussions with cryptocurrency firms to introduce stablecoins on its platform, following its failed attempt to launch Diem for cross-border payments in 2019. Likewise, Walmart, Amazon, and large commercial banks are exploring the prospect of issuing their own stablecoins.^[4]

Increased Competition in the Digital Asset Industry

Counterintuitively, emerging disruptive digital asset projects had a competitive advantage by operating outside the mainstream financial system and in an environment of regulatory uncertainty. In essence, the regulatory risk associated with digital assets acted as a barrier to entry for established firms, while new entrants were better positioned to navigate and bear the risk. As digital assets integrate with traditional finance and regulatory risk decreases, competition is expected to increase as incumbents leverage network effects and institutional advantages to vie for market share. As a by-product, dealmaking is expected to increase as the industry consolidates with incumbents pursuing a buy, build, or partnership strategy, as exemplified by Robinhood’s recent acquisition of Bitstamp, one of the longest-running cryptocurrency exchanges.

The growing competition between established companies and new entrants will be significantly shaped by both legislative and regulatory developments. The U.S. Securities and Exchange Commission (“SEC”), as the primary regulator of the U.S. financial market, stands at the epicenter of these market dynamics as it works to establish a regulatory framework for digital assets that aligns with the current administration’s priorities and its mission of protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation. As part of its broader mandate to facilitate capital formation, the SEC aims to foster innovation in the economy. The SEC’s role will be crucial because the generally adaptable and flexible framework of securities law is beginning to show signs of discordance with the transformative potential of digital asset use cases, such as tokenization of assets, heightening the stakes in this rapidly changing landscape.

Tokenization of the securities market and financial assets is, in part, a continuation of the evolution of dematerialization. As technology advances, market participants are adopting disruptive technologies to increase efficiency and reduce friction in value transfer.

Traditionally, dematerialized records and information depicting ownership or value are maintained on centralized ledgers or databases with trusted central intermediaries. With the launch of Bitcoin, Satoshi Nakamoto introduced a cryptographic proof mechanism that employs blockchain technology to maintain information about crypto assets and facilitate peer-to-peer transactions in a decentralized manner, eliminating the need for a central intermediary.^[5] This innovation opened up the market to new entrants.

Next-generation Layer-2 protocols, which mainly operate off-chain and do not record every transaction on the base-layer or Layer-1 blockchain networks, along with validation solutions—the consensus mechanisms used to maintain a consistent and reliable ledger and verify transactions—are emerging to address scalability and interoperability challenges. Tokenizing real-world assets to streamline value transfer across centralized and decentralized networks, on both permissioned and permissionless databases, using tools like smart contracts as accelerants, is evolving from mere proof of concept to implementation.

As digital assets continue to gain mainstream acceptance and the regulatory framework evolves, market forces will increase competitive pressure, creating both aligned and conflicting interests among established companies and new entrants. The SEC has committed to maintaining a merit- and technology-neutral approach as it considers various policy interests and competing perspectives to develop a regulatory framework for crypto assets that does not undermine established approaches for regulating noncrypto assets and transactions.

The Developing Regulatory Landscape and Its Impact on Competition

The SEC Task Force and Taxonomy

Recently, SEC Chairman Paul S. Atkins announced Project Crypto—“a Commission-wide initiative to modernize the securities rules and regulations to enable America’s financial markets to move on-chain.”^[6] The announcement comes on the heels of the President’s Working Group on Digital Asset Markets releasing a report that, among other things, recommends that the SEC and other federal agencies use their existing authorities to provide clarity to market participants on issues such as registration, custody, trading, and recordkeeping.^[7] Chairman Atkins directed the SEC’s policy division to work with the crypto task force to develop proposals to implement the report’s recommendations.

The SEC launched its crypto task force on January 21, 2025, headed by Commissioner Hester M. Peirce, to help develop a regulatory framework for digital assets. Subsequently, on February 21, 2025, Commissioner Peirce released a statement, “There Must Be Some Way Out of Here” (“Statement”), which provides an insightful framework for analyzing key issues in the developing regulatory structure of digital assets.^[8] The Statement presents a potential taxonomy of four categories that serve as guideposts for a series of questions that the task force is considering to eliminate barriers for firms seeking to innovate with crypto assets and blockchain technology. The Statement requests public input on key topics, including security status, trading, custody requirements for various parties, ETPs, and tokenized securities.

Taxonomy, or the classification of digital assets for regulatory purposes, is a critical issue influencing competition between incumbents and new entrants in the financial market, as it forms the foundation for the regulatory treatment of these assets. To the extent that a new asset type serves similar functions or provides utility comparable to that of a traditional asset class, differences in regulatory costs or treatment can lead to unfair competitive advantages or disadvantages for market participants vying for market share. For instance, if an asset is deemed a security, the SEC will have primary regulatory jurisdiction, and the asset will be subject to the broad regulatory framework governing securities, including custody requirements and third-party intermediary obligations, such as those for exchanges, broker-dealers, and clearing agencies. 

Technological advancements occasionally create dilemmas within a regulatory framework that require policymakers and regulators to reassess traditional classification lines and paradigms. As noted by industry experts, digital assets might have created such a dilemma in securities law. Broadly, the Securities Act and the Exchange Act enumerate several financial instruments that constitute a security, including the catchall term investment contract, which is intended to encompass various schemes that were not specifically listed.

During the secondary sale of digital assets that were the subject of the investment contract in an initial coin offering (“ICO”)—likely within the context of an exempt transaction—and that may not have any utility outside the ecosystem that created the investment contract, it is necessary to decouple the digital assets, which are merely computer code and alphanumeric cryptographic sequences, from the transactions or schemes in which the assets were sold, or to imply that the digital assets are more than just the subject of the investment contract.^[9] Separating the digital asset from the investment contract creates a potential regulatory gap and ambiguity in which the digital asset falls outside the regulatory framework of securities laws, as digital assets are not enumerated securities and do not clearly fall within the purview of the Commodity Futures Trading Commission (“CFTC”).

Most market participants in the crypto industry agree that establishing a clear and consistent taxonomy would enhance clarity in the industry’s regulatory framework. However, opinions vary on the most effective approach to categorize crypto assets and transactions. One of the Statement’s categories decouples crypto assets that are offered and sold as part of an investment contract, which is a security, from the crypto asset that may not itself be a security.^[10] Moreover, there is a specific category for tokenized securities.

Recent Guidance on Application of Federal Securities Laws to Digital Assets

In addition to taxonomy, the roles of market intermediaries and the custody of digital assets are crucial elements in the developing framework for digital assets, as they serve as key components in the competitive landscape and development of the digital asset ecosystem. As the SEC Staff (“Staff”) works on drafting definitive rules to regulate digital assets, it has issued several statements to clarify its position and provide guidance on the application of the federal securities laws to digital assets. Earlier this year, the Staff issued a statement clarifying that meme coins are presumptively not considered securities because they are typically purchased for entertainment, social interaction, or speculative purposes rather than as investments in a common enterprise with a reasonable expectation of profits, which are essential elements of an investment contract.^[11]

On May 29, 2025, the Staff issued a statement clarifying that certain staking activities on blockchain networks using proof-of-stake as a consensus mechanism do not constitute an investment contract and are not subject to securities law.^[12] The statement emphasized the difference between services that are merely administrative or ministerial and those that are entrepreneurial or managerial in nature. The former are indicative of nonsecurities transactions, while the latter have the propensity to be part of an investment contract.

Most recently, on August 5, 2025, the Staff issued a statement on certain liquid staking activities that have broad-reaching implications.^[13] Generally, liquid staking is a type of protocol that issues newly minted digital assets or staking receipt tokens that evidence ownership of digital assets deposited with a third-party staking service provider. Staking receipt tokens enable holders to maintain liquidity, pledge them as collateral, and participate in revenue-generating applications without withdrawing the deposited digital asset from staking.

It is the Staff’s view that liquid staking activities, as defined, do not involve the offer and sale of securities, nor does the offer and sale of staking receipt tokens, as described, unless the deposited digital assets are part of or subject to an investment contract. Regarding liquid staking activities, the Staff believes that service providers do not undertake entrepreneurial or managerial efforts, but rather perform administrative or ministerial tasks. The two statements provide a useful framework for structuring staking programs and related activities outside the scope of securities laws and have been largely lauded by the industry. However, it is important to note that these statements are nonbinding and highly fact dependent.

Legislative Developments

Along with developments involving regulatory bodies, there has been significant legislative movement toward establishing a framework for digital asset businesses to operate in the United States. On July 17, 2025, the House of Representatives passed the Digital Asset Market Clarity Act (“CLARITY Act”).^[14] Subsequently, the Senate Banking Committee released a draft of the Responsible Financial Innovation Act (“RFLA”) for responses.^[15] While the two acts overlap in some areas, they also differ considerably. Notably, the CLARITY Act is much more comprehensive than the RFLA, but both establish a regulatory framework for digital assets by dividing authority between the SEC and CFTC based on whether an asset is classified as a security or “digital commodity,”^[16] with the SEC having jurisdiction over securities and the CFTC over digital commodities. Generally, the CLARITY Act tends to classify more digital assets as digital commodities, while the RFLA gives the SEC more discretion to decide which assets should be considered “ancillary assets”—that are not securities—thus retaining more regulatory oversight. Whether and which version of this legislation ultimately gets enacted will greatly influence the trajectory of digital assets in the financial system, as legislation is lasting in nature and will shape the actions of regulators.

Nasdaq and SIFMA Recommendations

Market participants are highly vested in the evolving digital assets regulatory framework, as it will establish the foundation for competition in providing products and services, such as custody solutions, trading platforms, and broker-dealer services for financial products.

Notably, Nasdaq urged the SEC to promote fair competition among similarly situated financial instruments and market participants. It emphasized that “digital asset trading platforms and existing market participants should compete on a level playing field for all instruments.”^[17] In essence, Nasdaq is advocating to treat like assets alike and avoid differences in regulation that create the opportunity and incentive for regulatory arbitrage.^[18]

Similarly, the Securities Industry and Financial Markets Association (“SIFMA”) recommends that the SEC adopt the principle of “same risk, same activity, same regulatory outcome” to ensure that digital assets and market participants are subjected to regulatory outcomes that are risk-appropriate and consistent with those applied to traditional assets and market participants.^[19] SIFMA advocates that regulatory treatment should be based on the underlying risks associated with a given asset or transaction rather than the technology used. Additionally, SIFMA encourages the SEC to apply existing and well-established securities regulatory principles to digital assets whenever feasible, rather than developing a separate regulatory framework for this new class of assets and transactions. Moreover, this approach should be implemented through flexible, principle-based guidance rather than prescriptive mandates.

Fairness and Evaluation of Compatibility with Existing Regulatory Frameworks

Competitive pressure is creating a subtle dichotomy between relatively new entrants (such as Circle, Coinbase, and Consensys) and traditional players in the financial industry. Generally, the former group prefers a tailored regulatory framework to efficiently serve their niche target market, while the latter group favors a broader regulatory approach. Policymakers and regulators find themselves in the middle, tasked with discerning which aspects of this new asset class are genuinely innovative and incompatible with regulatory regimes, warranting a reassessment of existing regulatory frameworks as they strive to advance their mission and priorities. The questions posed by the SEC in the Statement highlight this complexity.

A helpful approach to analyzing the issues raised by the questions in the Statement is to examine their impact on the emerging asset class, the various intermediaries competing for market share, and the overall financial market. This is particularly relevant as the SEC works to fulfill its mission and ensure that the regulatory framework for digital assets does not become impractical or unduly hinder innovation. For example, many crypto projects do not involve traditional actors, such as an issuer to whom ongoing reporting obligations can be ascribed, a cornerstone upon which current securities law relies.^[20]

As digital assets intersect with traditional finance and compete for market share in similar products and services, it is essential to establish a regulatory framework that promotes healthy competition between traditional models and projects based on blockchain technology—for instance, regulating platforms and market participants that trade securities alongside nonsecurities digital assets in a manner that does not unduly favor or disadvantage any particular market participant.

Along the same lines, establishing a fair regulatory environment may require considering the distinct features of emerging technologies—for example, assessing the potential incompatibility of rules enacted pursuant to section 17(f) of the Investment Company Act of 1940 with the custody of digital assets, or updating auditing, accounting, and valuation requirements to support digital asset custody. Likewise, given some of the unique characteristics of blockchain technology, it may be necessary to determine whether special considerations are warranted for broker-dealers to meet their best execution obligations, and the appropriate haircut to assess whether a digital asset is readily convertible into cash to satisfy the net capital rule for broker-dealers.^[21]

Lastly, how should the SEC address the advantages of digital assets that arguably render sections of the securities law outdated? For instance, proponents argue that the transparency and enhanced security features of blockchain technology make certain brokers, dealers, and custody issues moot.

Conclusion

Digital assets have the potential to revolutionize the global economy and transform the way we transfer value. The interaction between legislative/regulatory development and emerging technology will significantly impact competing market participants and the growth of the fintech industry. The SEC stands at the center of this fascinating dynamic as it navigates its role in protecting investors and facilitating capital formation.

This dynamic raises two crucial policy questions.

First, when technological advancements lead to dilemmas within a regulatory framework, what approach should policymakers and regulators adopt regarding any ensuing competition among market participants? At a recent symposium, Commissioner Peirce remarked that the government should not be in the business of picking winners and losers.^[22] In other words, the economy functions most efficiently when the government maintains a fair playing field in structuring its regulatory regime. It is important to note that ensuring a fair playing field should be considered in terms of both government action and inaction. Specifically, failing to update a regulatory regime in response to technological advancements that necessitate such change can have a negative impact on competition just as much as making direct rule changes.

Second, who should be at the forefront of establishing the rules of the road for the industry? On the one hand, the courts play a crucial role, as evidenced by the evolving case law of the Howey test as it relates to digital assets, which is significantly influenced by regulators and the enforcement actions they pursue, and private litigation to a lesser extent. On the other hand, regulators could take the lead through rulemaking and guidance. Alternatively, lawmakers can also lead through legislation. Each approach has its benefits and drawbacks, from the definitive nature of legislation to the flexibility offered by regulatory actions. 

As lawmakers and regulators work to modernize regulatory frameworks to address disruptive technological developments in a manner that balances maintaining market integrity with the need to avoid stifling innovation with ill-suited regulatory regimes, allowing new products like the tokenization of assets to thrive, market dynamics such as competitive forces must be considered. Undoubtedly, lawyers will play a vital role in helping market participants navigate the rapidly evolving legal and regulatory landscape of digital assets. Lawyers will need to have a keen intellect and a deep understanding of sociopolitical developments, the regulatory priorities of policymakers and regulators, market dynamics in the fintech industry, and the technology driving these changes in order to help clients navigate this emerging industry, which is filled with risks and opportunities.

1. As defined in Framework for “Investment Contract” Analysis of Digital Assets, U.S. Sec. & Exch. Comm’n (updated July 5, 2024). Note, for simplicity, that this article uses the term crypto interchangeably with digital assets to align with the terminology commonly used among market participants. ↑

2. Press Release, Fed. Deposit Insurance Corp., FDIC Clarifies Process for Banks to Engage in Crypto-Related Activities (Mar. 28, 2025). ↑

3. Emp. Benefits Sec. Admin., Compliance Assistance Release No. 2022-01: 401(k) Plan Investments in “Cryptocurrencies,” U.S. Dep’t of Lab. (Mar. 10, 2022). ↑

4. Leo Schwartz & Ben Weiss, Exclusive: Meta in Talks to Deploy Stablecoins Three Years After Giving Up on Landmark Crypto Project, Yahoo! Fin. (May 8, 2025); Gina Heeb & Justin Baer, Big Banks Explore Venturing into Crypto World Together with Joint Stablecoin, Wall St. J. (updated May 22, 2025). ↑

5. Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System (last visited July 12, 2025). ↑

6. Paul S. Atkins, Chairman, U.S. Sec. & Exch. Comm’n, American Leadership in the Digital Finance Revolution (July 31, 2025). ↑

7. Fact Sheet: The President’s Working Group on Digital Asset Markets Releases Recommendations to Strengthen American Leadership in Digital Financial Technology, The White House (Jul. 30, 2025). ↑

8. Statement, Hester M. Peirce, Comm’r, U.S. Sec. & Exch. Comm’n, There Must Be Some Way Out of Here (Feb. 21, 2025). ↑

9. Frantz Jacques, Intersectionality of Regulatory Law and Development of Digital Assets, Bloomberg L.: Prac. Guidance (Dec. 2024). ↑

10. Statement, supra note 8. ↑

11. Press Release, U.S. Sec. & Exch. Comm’n, Staff Statement on Meme Coins (Feb. 27, 2025). ↑

12. Press Release, U.S. Sec. & Exch. Comm’n, Statement on Certain Protocol Staking Activities (May 29, 2025). ↑

13. Press Release, U.S. Sec. & Exch. Comm’n, Statement on Certain Liquid Staking Activities (Aug. 5, 2025). ↑

14. Digital Asset Market Clarity Act of 2025, H.R. 3633, 119th Congress (2025). ↑

15. Sen. Tim Scott, Sen. Cynthis Lummis, Sen. Bill Hagerty, & Sen. Bernie Moreno, Senate Banking Committee Digital Asset Market Structure Request for Information (July 22, 2025). ↑

16. As defined in the CLARITY Act. Note, the CLARITY Act and the RFLA do not adopt the same taxonomy. The CLARITY Act mainly uses the term “digital commodities,” while the RFLA uses the term “ancillary assets” for classification purposes. ↑

17. Letter from John A. Zecca, Exec. Vice President & Glob. Legal, Risk, & Regul. Officer, Nasdaq, to Vanessa Countryman, Sec’y, U.S. Sec. & Exch. Comm’n (Apr. 25, 2025). ↑

18. Id. ↑

19. Letter from Kenneth E. Bentsen Jr., CEO & President, Sec. Indus. & Fin. Mkts. Ass’n, to Comm’r Hester M. Peirce & Members of Crypto Task Force, U.S. Sec. & Exch. Comm’n (May 9, 2025). ↑

20. Exploring Bipartisan Legislative Frameworks for Digital Assets: Hearing Before the S. Comm. on Banking, Hous., & Urb. Affs., 119th Cong. 3 (2025) (testimony of Lewis Rinaudo Cohen, Partner, Cahill Gordon & Reindel LLP). ↑

21. 17 C.F.R. 240.15c3-1. ↑

22. The Fintech Foundation, A Conversation with U.S. Securities and Exchange Commissioner Hester Peirce, (YouTube, Jun. 17, 2025). ↑

A question that we are frequently asked here in the United Kingdom is the extent to which UK financial services law can impact financial services businesses operating in the United States (and elsewhere outside the UK). At one end of the spectrum, some US firms assume that, even if they have UK clients, they can ignore UK regulation provided that they only operate from the United States. At the other end of the spectrum, some assume that they will need to be authorized in the UK if they want to deal with UK clients.

In fact, the position is more nuanced. While it would be unwise to ignore UK regulation when dealing with UK clients, there are various ways in which US financial services firms can lawfully provide services to UK clients without having any particular status under UK law.

One important consideration is that UK financial services regulation has a broad scope. While it obviously covers the activities of banks, insurers and financial advisers, it can also cover a wide range of other businesses (including lenders, credit brokers and payment services firms).

In this article we provide an overview of the UK financial services regime, with a particular focus on how it can apply to US businesses.

Relevant Legislation

The Financial Services and Markets Act 2000 (“FSMA”) is the principal piece of legislation governing the carrying out of financial services in the UK. Beneath the FSMA is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (“RAO”). The RAO lists the activities and investments that are subject to regulation under the FSMA (“Regulated Activities” and “Regulated Investments”).

The list of Regulated Activities includes:

1. dealing in investments
2. arranging deals in investments (including broking insurance contracts and regulated credit agreements),
3. advising on investments and
4. entering into a regulated credit agreement as lender.

The list of Regulated Investments includes:

1. shares,
2. futures,
3. contracts of insurance and
4. electronic money.

Certain type of cryptoassets will fall within the definition of electronic money or of other types of Regulated Investment. Even if a given cryptoasset is not a Regulated Investment, it may be subject to the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLRs”), which list certain activities (“Cryptoasset Registration Activities”) that are subject to regulatory supervision. (While the MLRs capture the activities of certain cryptoasset firms (and other businesses such as estate agents and casinos), they do not cover FSMA-authorized firms dealing in Regulated Investments because such firms are already subject to the Financial Conduct Authority’s anti-money laundering regulation.) Additionally, the Payment Services Regulations 2017 (“PSRs”) list the regulated payment services (“Regulated Payment Services”).

The RAO, MLRs, and PSRs also set out exclusions and exemptions from the scope of various Regulated Activities, Cryptoasset Registration Activities, and Regulated Payment Services (collectively, “Relevant Activities”).

The principal financial services regulatory authorities in the UK are the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”). The PRA is the micro-prudential regulator for systemically important firms, including banks and insurers. The FCA is the prudential regulator for firms that are not systemically important and is the conduct regulator for all FSMA-authorized firms. The FCA also has supervisory/regulatory roles under the MLRs and the PSRs. (A more detailed account of the roles played by these regulators is beyond the scope of this article.)

Criminal Offenses

Section 19 of the FSMA establishes the “general prohibition.” This makes it a criminal offense for a person to carry out a Regulated Activity by way of business in the UK unless the relevant person is either authorized under the FSMA or exempt from the need to be authorized under the FSMA. The maximum penalty for breaching the “general prohibition” is two years’ imprisonment and an unlimited fine.

It is also a criminal offense to provide a Regulated Payment Service as a regular occupation or business activity in the UK without the correct regulatory status. Depending on the circumstances, it may also be a criminal offense to carry out Cryptoasset Registration Activities in the UK without the correct regulatory status.

Scope of the UK Financial Services Regulatory Regime

If a US financial services firm wishes to take on UK clients, one of the first questions that it should ask is, “Will our business fall within the scope of a Regulated Activity?”

Sometimes the answer to that question will be fairly clear. For instance, if the US firm would be advising clients on the buying and selling of shares, then there would be a good chance (subject to exclusions, etc.) that the US firm would be carrying out the Regulated Activity of advising on investments. However, depending on the precise nature of the service, it might be that the given business could be deemed not to be providing advice but merely to be providing information. In such a case, there may be a strong argument that no Regulated Activity would be carried out.

The distinction between a course of conduct that falls within the scope of a Regulated Activity and a course of conduct that falls outside the scope of a Regulated Activity can therefore be a fine one. The conclusion may depend on seemingly small points of detail. As such, it is possible for two firms to be pursuing similar (but not identical) business models where one is carrying out a Regulated Activity but the other is not.

Given this, firms should be wary of simply copying the approach that is apparently being adopted by others in the given market. Firms can sometimes be tempted to observe that some of their competitors are not FCA-authorized and then to assume that they do not need to be authorized themselves. Unfortunately, such assumptions frequently prove to be mistaken. First, it may be that the given competitors do in fact need to be authorized and that they are in breach of the relevant regulation. Second, there may be a subtle difference between the business model that the new entrant wants to roll out and the business model being operated by its competitors. This difference may not be apparent to anyone without a deep understanding of both business models, but it can make all the difference to the question of whether or not a Regulated Activity is being carried out.

Carrying Out Relevant Activities from Outside the UK

As we have seen, a person who is neither authorized nor exempt under the FSMA will be committing a criminal offense if they carry out a Regulated Activity by way of business “in the United Kingdom.” This will often be a particularly relevant consideration for US financial services firms. Unfortunately, the mere fact that the provider of a given financial service is in the United States (and therefore not physically in the UK) when they perform the given activity does not necessarily mean that the person will not be carrying out a Regulated Activity “in the UK.”

By way of example, in the context of the Regulated Activity of advising on investments, FCA guidance states that “advising . . . is generally considered to take place where the advice is received.”

The position can be more nuanced in relation to other Regulated Activities. For instance, FCA guidance in the context of the Regulated Activity of dealing in investments as principal states that “for dealing activities, the location of the activities will depend on factors such as where the acceptance takes place, which in turn will depend on the method of communication used.” In the case of this Regulated Activity, however, a US firm may be able to use an exclusion for “overseas persons” who enter into transactions as principal “with or through an authorised person” or with “an exempt person who is acting in the course of a business comprising a regulated activity in relation to which he is exempt.” As such, if the US firm can establish a suitable relationship with a UK person who has the relevant regulatory status, it may be able to carry out its business model (or at least a version thereof) without needing to be authorized under the FSMA.

Regulatory guidance also assists in determining whether Regulated Payment Services or Cryptoasset Registration Activities are being carried out “in the UK.”

If a US firm can structure its business so that any Relevant Activities that it may carry out are not carried out “in the UK” for regulatory purposes, then, subject to further analysis, it should be able to do so without breaching the general prohibition.

In such a case, the given US business would probably turn its attention to the question of how it would win UK clients in the first place (and to the question of how to do so in compliance with UK law).

Marketing

A separate point relates to the issue into the UK of “financial promotions,” which in summary are invitations or inducements to engage in investment activity—for example, placement memoranda and various advertisements. The starting point in relation to these is that an unauthorized person may only issue a financial promotion that is capable of having an effect in the UK if (i) the content has been approved by a suitably qualified authorized person or (ii) it falls within an exemption set out in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“FPO”).

Some FPO exemptions relate to the nature of the promotion’s recipient(s). These exemptions are designed for recipients such as investment professionals and high-net-worth individuals. Such exemptions require the promotion to include various warnings and pieces of information. There are also specific exemptions for “overseas communicators.”

It should be noted that some exemptions only apply to certain Regulated Activities, Regulated Investments, or types of communication. It is also worth noting that the financial promotions rules can apply even to promotions regarding businesses that fall within exclusions from the scope of Regulated Activities.

Reconfiguring a Financial Services Business

If an initial analysis concludes that a given business model does fall within the scope of a Relevant Activity, then financial services firms may wish to think about whether they can restructure their operations so as to take them outside this scope. One way of doing this might be to alter the arrangements so that they fall within an exclusion.

More broadly, a firm may be able to partner with a firm that is FCA-authorized. A common approach in this regard is to become an appointed representative (“AR”) of an FCA-authorized firm (the AR’s “Principal”).

ARs may lawfully carry out some (though not all) Regulated Activities without authorization because they benefit from their Principal’s FCA permissions. ARs are not subject to direct regulation by the FCA, but Principal firms often impose stringent monitoring procedures on their ARs.

From the point of view of US firms, it should be noted that special arrangements apply in the context of overseas ARs.

Authorization

If restructuring is not an option and if a US firm’s business model would entail carrying on Relevant Activities by way of business and/or as a regular occupation in the UK, then the firm may need to establish a UK company and apply for authorization under the FSMA.

Conclusion

It is not always easy to navigate the UK’s financial services regime. However, many US firms are able to structure their businesses so that they can act for UK clients without attracting an excessive compliance burden.

On April 10, 2025, the New York City Bar Association, in partnership with the Society of Foreign Consuls in New York (“SoFC”), organized an illuminating two-part panel session entitled “Navigating Shifts in Immigration Policy.” This program—hosted by the Office of Diversity, Equity, Inclusion and Belonging of the New York City Bar Association—was held at the historic House of the New York City Bar Association Building, followed by a networking reception thereafter.

Founded in 1925, the SoFC “represents the world’s largest consular corps comprising Consulates, Consulates General, and Honorary Consulates based in New York City.” Working closely with the U.S. State Department’s Office of Foreign Missions and the NYC Mayor’s Office for International Affairs, the SoFC safeguards the interests of the consular corps in New York City and fosters cultural and economic ties with the United States of America. In 2025, the SoFC celebrated its one-hundredth anniversary and organized a series of events throughout the year to commemorate this milestone.

From left to right: AIC Executive Director Jeremy Robbins, Commissioner Manuel Castro of NYC’s MOIA, Consul General of Serbia Vladimir Božović, then Consul General of Malaysia and SoFC President Amir Farid Abu Hasan, Consul General of Thailand Somjai Taphaopong, Consul General of Peru Oswaldo Del Aguila, and Christina Chelliah, Corporate Counsel at TransPerfect and ABA BLS Fellow (Class of 2024–26). Photo courtesy of Christina Chelliah.

This first‑of‑its‑kind partnership emerged from a coffee meeting in early 2025 between the author—a current ABA Business Law Section Fellow (Class of 2024–2026)—and Amir Farid Abu Hasan, president of the Society of Foreign Consuls and then consul general of Malaysia. Organized as part of the SoFC centennial celebrations, the program created a formal platform for engagement between the SoFC and leaders in the legal profession.

Navigating Changing Policies in Times of Uncertainty

This invite-only event drew more than 130 attendees, including consuls general and consular representatives from thirty-four countries, lawyers in leadership positions from eighteen bar associations, legal experts, policymakers, and city representatives.

The first panel, moderated by Jeremy Robbins, executive director of the American Immigration Council (“AIC”), highlighted government and consular perspectives. Panelists included Commissioner Manuel Castro from the NYC Mayor’s Office of Immigrant Affairs (“MOIA”), Consul General of Serbia Vladimir Božović, and Consul General of Peru Oswaldo del Aguila. Commissioner Castro recounted his own journey as an immigrant in United States and emphasized the resources his office provides. The consuls general provided insights regarding the challenges faced by their respective diaspora populations and the support systems in place to deliver assistance. Robbins facilitated an excellent discussion between the panelists and spoke to the resources currently provided by the AIC as well as MOIA. This was beneficial information to the consuls general in attendance, as these resources will be helpful in dispensing assistance to the members of their respective diasporas who are facing immigration-related issues, which include visa renewal processes, removal proceedings, etc.

Consul General of Peru Oswaldo Del Aguila speaking during the event’s first panel session, “Government and Consular Perspectives.” Photo credit: Christina Chelliah.

The second panel, moderated by Benjamin Johnson, Executive Director of the American Immigration Lawyers Association (“AILA”), examined legal frameworks surrounding the issues raised in the first panel session and the shifting landscape of federal immigration laws. The lineup of panelists included renowned immigration law practitioners: Cyrus Mehta of Cyrus D. Mehta & Associates, PLLC; Rebekah Wolf, director of the Immigration Justice Campaign; and Professor Lenni Benson from New York Law School. One key takeaway from the second panel was that, beyond the right to legal representation, immigrants have the legal right to contact their consulate if detained by the authorities. Wolf explained that the only free call a detainee gets is to their consulate, which shows that consulates often have greater access to detainees, as they cannot be denied their right to call their consulate. In the event a detainee has no legal representation, or cannot afford to call a lawyer, then at the very least they get to make a call to their consulate.

Building a Bridge Between Diplomacy and Law

What began as a casual idea over coffee took on a life of its own and culminated in a first-of-its-kind event highlighting the intersectionality between diplomacy and law. Amir and I led planning efforts, leveraging our networks to organize a program that offered critical insights into the evolving landscape of immigration policy and provided the opportunity for future collaboration between legal experts, diplomatic representatives, and community leaders.

AILA Executive Director Benjamin Johnson moderated the second panel session, “Legal Perspectives.” Photo credit: Christina Chelliah.

In his opening remarks, New York City Bar President Muhammad Faridi said, “We recognize the vital role played by consulates in navigating these complex immigration issues alongside the legal profession. In these uncertain times, collaboration between our communities is more important than ever, so we can better serve and protect the rights and dignity of immigrants in New York.” He added, “Tonight’s gathering forms a powerful collaboration between the Society of Foreign Consuls and the New York City Bar Association—a partnership that reflects our shared commitment to justice, inclusivity, dialogue, and the dignity of immigrant communities.” 

SoFC President Amir Farid Abu Hasan echoed the importance of consular support in his speech. “As diplomats, we are not here to question the decisions of the federal government,” he stated. “Rather, we seek to understand the legal and policy ramifications of new immigration rulings so we can better advise and serve our communities. Immigration issues are complicated—and this forum brings together two vital professions, diplomats and legal experts, to build bridges and share knowledge.”

Importance of Collective Action Through Bar Associations

In times like this, it is rare to build bridges between diplomacy and law, but this program was an example of the benefits of doing so. My vision for creating a space where leaders could connect across communities led me to draw on my own professional network to invite affinity bar association leaders to this event to meet foreign diplomats in the City of New York. It is uncommon to curate a specific guest list for an event such as this, but I wanted to invite not just lawyers, but lawyers who hold leadership roles in bar associations, given the topic of the panel discussion and the work that is already being done by these bar associations.

Christina Chelliah delivering closing remarks at the “Navigating Shifts in Immigration Policy” program at the New York City Bar Association. Photo courtesy of Christina Chelliah.

Reflecting on my own path, in my closing remarks I spoke about my immigrant journey and the challenges I faced integrating into the legal profession as a foreign-trained attorney. In the closing remarks, I said, “As an immigrant myself and a foreign-trained attorney who completed both my formal and legal education outside the United States, bar associations were a refuge for me. They helped me find my footing in the legal profession after I was admitted to practice in New York. To all the lawyers here tonight—what you do shapes the fabric of our collective communities. Your dedication doesn’t go unnoticed, and you are truly making a difference! It is my hope that tonight’s event serves as a unique opportunity for leaders in the legal profession to build meaningful connections with the consulates, where diverse perspectives can be leveraged in fostering future collaboration in support of both your communities and your diaspora.”

I am grateful to have played a unique role in facilitating this partnership between the New York City Bar Association and the Society of Foreign Consuls. Programs like these help us to uplift one another and our communities, and they also advance the tenets of ABA Goal III in promoting full and equal participation in the legal profession by minorities.

Over the past several years, a growing number of jurisdictions have moved from preliminary guidance to fully developed regulatory regimes for digital assets.^[1] While no two frameworks are identical, many reflect shared structural features—such as asset taxonomies, licensing requirements, stablecoin-specific regimes, market integrity provisions, streamlined supervision, and enforcement mechanisms. These frameworks demonstrate how governments are adapting legal infrastructure or creating new frameworks to address the emergence of blockchain-based financial technologies and digital asset trading.

Bermuda was an early mover, establishing the Digital Asset Business Act in 2018 to govern licensing, compliance, and oversight of digital asset businesses. Singapore implemented a two-tier licensing regime through its Payment Services Act and is advancing a regulatory framework specifically for stablecoins. Switzerland applies its existing financial market laws to digital assets using a modular, classification-based approach developed by the Swiss Financial Market Supervisory Authority. Dubai introduced a bespoke framework within the Dubai International Financial Centre, combining token recognition rules with oversight of trading, custody, and issuance. The European Union adopted the Markets in Crypto-Assets Regulation to harmonize digital asset rules across all twenty-seven member states.

Other jurisdictions beyond the scope of this article have also developed, or are actively developing, digital asset regulatory frameworks. Even among jurisdictions with established regimes, rules continue to evolve in response to technological developments, market growth, and regulatory implementation experience.

This article examines high-level structural themes in digital asset regulation across five selected jurisdictions: Bermuda, Singapore, Switzerland, Dubai, and the European Union. It focuses on how key regulatory components such as those mentioned above are implemented in these regions. These jurisdictional analyses form the basis for identifying broader high-level structural themes in digital asset regulation and exploring their intersection with efforts to modernize financial infrastructure.

The comparative themes that emerge—such as setting forth a clear taxonomy, developing stablecoin-specific regimes, and providing for robust market integrity provisions—suggest some structural commonalities in how jurisdictions are approaching digital asset regulation. At the same time, jurisdictional differences in treatment of taxonomies, scope and specifics of regulatory frameworks, supervision, implementation, and enforcement reveal how existing legal frameworks, regulatory stances, and market priorities may shape regulatory choices. Finally, the paper discusses how these regulatory structures increasingly intersect with efforts to modernize core financial infrastructure, particularly through blockchain-based clearing and settlement systems.

The Global Landscape: Selected Jurisdictions

The sections that follow provide a jurisdiction-by-jurisdiction overview of five selected frameworks. Each description focuses on how core regulatory components are structured and implemented within the local legal and institutional context.

Bermuda (2018): An Early Mover

Overview. Bermuda set the standard for early digital asset regulation when it introduced the Digital Asset Business Act (“DABA”) in 2018,^[2] one of the world’s first licensing regimes for digital asset businesses. The framework includes cybersecurity requirements, consumer protection measures, and financial crime prevention provisions while allowing for regulatory adaptation as the sector evolves. The framework is designed to evolve with market developments, ensuring Bermuda remains a competitive jurisdiction for financial technology. It has been continuously updated to change alongside the dynamic sector.^[3]

Taxonomy. Under DABA, a “digital asset” is any binary-format entity with usage rights and a digital representation of value that is used as a medium of exchange, unit of account, or store of value.^[4] It excludes legal tender, whether or not the entity is denominated as such. DABA establishes a detailed licensing regime for entities involved in digital asset trading, with license classes categorized into established businesses, those in regulatory sandboxes, and those in trial operations. Additionally, entities must ensure cybersecurity protections, regular audits, and transparent consumer disclosures on redemption rights and fees. Operating without the necessary license can incur fines of up to US$250,000 and/or imprisonment for up to five years, with penalties for noncompliance reaching as high as US$10 million.

Stablecoin regime. Stablecoins are covered under DABA and defined as digital assets pegged 1:1 to a global currency like the U.S. dollar or another asset, ensuring greater stability than other digital assets such as utility tokens. In November 2024, the Bermuda Monetary Authority (“BMA”) followed up with a guidance note specifically addressing this category of single-currency pegged stablecoins.^[5] The guidance establishes governance arrangements for issuers, due diligence processes to identify market makers, asset-backing requirements, and provisions for regular audits and stress testing.

Market regulation. DABA enforces market misconduct regulations against fraud, money laundering, and terrorist financing and references an international cooperation policy released by the BMA that ensures digital assets are circulated in coherence with global standards. Additionally, DABA emphasizes that Bermuda offers an attractive environment for digital asset businesses. The jurisdiction imposes no taxes on digital assets, income, capital gains, or transactions, and companies can apply for an undertaking from the minister of finance, ensuring future tax exemptions if new tax laws are introduced.

Notable provisions. The BMA conducts annual industry consultations to evaluate digital asset industry developments and assess whether regulatory refinements are needed. Additionally, the BMA is building a regulatory framework for digital identity, aimed at promoting the use of digital credentials that could securely store personally identifiable information and streamline customers’ onboarding with multiple service providers. Finally, Bermuda has memorandums of understanding (“MOUs”) in place with other jurisdictions, which facilitates cooperation across jurisdictions and clarifies their effective supervision. One such MOU was signed with the Wyoming Division of Banking in February 2021.^[6]

Summary. By establishing one of the world’s first crypto licensing regimes and continuing to refine it for new contexts, Bermuda aims to leverage its forward-thinking business ecosystem to attract the fast-developing digital asset industry.

Singapore (2019, 2023): A Model for Regulatory Stability

Overview. Singapore has taken a proactive approach to regulating digital assets, ensuring that innovation can thrive within a transparent and well-supervised financial system. Singapore regulates digital assets under its Payment Services Act (“PSA”) and is introducing a stablecoin regulatory framework that imposes reserve requirements and operational standards for issuers. The PSA of 2019^[7] established a licensing framework for digital payment token (“DPT”) businesses, providing for regulatory certainty and consumer protection overseen by the Monetary Authority of Singapore (“MAS”). In 2023, Singapore strengthened its oversight with a stablecoin regulatory framework,^[8] setting specific requirements for stablecoin issuers to maintain financial stability and investor confidence.

Taxonomy. Under the PSA, digital payment token is defined as a digital representation of value that is not denominated in or pegged to any currency but is widely accepted as a medium of exchange. Bitcoin, for example, falls under this classification. Businesses conducting DPT services must obtain a standard payment institution license or a major payment institution license (“MPIL”), with the latter required if monthly payment transactions exceed S$3 million over a calendar year.^[9] MPIL firms must have a business entity domiciled in Singapore, meet a minimum base capital requirement of S$250,000, and adhere to specific board requirements.

Stablecoin regime. To prevent regulatory arbitrage, MAS clarified key distinctions between e-money and stablecoins. MAS states that while e-money represents a digital form of currency that retains its monetary value, stablecoins—particularly single-currency stablecoins (“SCSs”)—can fluctuate in value when traded on exchanges. Consequently, MAS classifies stablecoins as DPTs rather than e-money, ensuring that they fall under the appropriate regulatory framework.

Singapore’s soon-to-be-implemented Stablecoin Regulatory Framework of 2023 requires issuers to back their tokens with reserves that meet strict composition, valuation, custody, and audit standards. Issuers must maintain minimum base capital and liquid assets to mitigate insolvency risks and ensure an orderly wind-down process if needed. Redemption rights are also enforced, requiring issuers to return the par value of stablecoins within five business days upon request. Additionally, issuers must provide transparent disclosures about value stabilization mechanisms, investor rights, and audit results for reserve assets.

Summary. Singapore’s risk-based approach to digital asset regulation has created an environment that fosters digital innovation while providing protection for consumers and its financial system. This approach has solidified its status as a leader in digital asset regulation, attracting firms seeking clarity and a well-structured regulatory framework.

Switzerland (2020): A Modular, Principles-Based Approach

Overview. Switzerland relies on amendments to existing legal documents and guidance from the Swiss Financial Market Supervisory Authority (“FINMA”) to provide legal certainty for distributed ledger technology (“DLT”). Switzerland regulates digital assets through a modular framework that applies general financial market laws alongside specific guidance and licensing regimes issued by FINMA. Rather than enacting a single comprehensive digital asset statute, Switzerland relies on a combination of existing legislation (such as the Financial Market Infrastructure Act (“FMIA”), the Swiss Banking Act, and the Anti–Money Laundering Act (“AMLA”)) and sector-specific guidance and classifications to determine regulatory treatment.

Taxonomy. FINMA classifies digital assets into three main categories—payment tokens, utility tokens, and asset tokens—with the understanding that hybrid forms may also arise. Payment tokens are intended to function as a means of exchange and do not confer claims on the issuer. Utility tokens provide access to a digital application or service based on blockchain infrastructure. Asset tokens represent legal claims, such as debt or equity interests, and function similarly to traditional securities or financial instruments. This taxonomy governs whether a digital asset is subject to banking, securities, or collective investment scheme regulations and guides the application of licensing and conduct obligations.

Stablecoin regime. Switzerland has not enacted specific legislation governing stablecoins. Instead, FINMA provides supervisory guidance on how existing financial laws apply. In July 2024, FINMA published updated guidance outlining the treatment of stablecoin projects under Swiss law. The guidance notes that various stablecoin issuers in Switzerland use default guarantees from banks. As a result, they do not require a banking license under article 5, paragraph 3, letter f, of the Swiss Banking Ordinance but must be affiliated with a self-regulatory organization as a financial intermediary under the AMLA.

This exemption, however, introduces risks for both stablecoin holders and the banks providing the guarantees. Stablecoin holders do not benefit from the depositor protections that apply to banking clients under article 37a of the Banking Act. Banks providing default guarantees face potential legal and reputational exposure, especially in cases of issuer insolvency or noncompliance with AMLA obligations. FINMA has outlined minimum requirements for default guarantees, including full coverage of public deposits, enforceability in bankruptcy, and rapid execution in the event of default. The regulator has also flagged increased risks in the areas of money laundering, terrorist financing, and sanctions circumvention, emphasizing that stablecoin issuers are subject to full AMLA compliance, including identity verification and beneficial ownership disclosure.

Services and markets regulation. Switzerland has implemented a licensing category for DLT trading systems under the FMIA, enabling fully regulated venues to trade tokenized securities. The DLT Act amended several pieces of Swiss legislation to clarify the legal treatment of tokenized shares, bonds, and uncertificated register securities. These updates provide legal certainty for the issuance and transfer of DLT-based assets.

Notable provisions. Separately, Switzerland introduced a fintech license designed for firms that engage in limited banking activities—such as accepting deposits up to CHF 100 million—without conducting traditional lending or investment services. Institutions operating under this license are not subject to capital adequacy or liquidity requirements but must maintain minimum capital, meet AMLA obligations, and establish compliance and risk-management frameworks. The fintech license provides a regulatory on-ramp for firms engaged in custody, exchange, or payment services involving digital assets.

Summary. Switzerland applies existing financial market laws to digital assets through a modular framework, relying on guidance from FINMA and the application of core statutes. The legal classification of tokens, the availability of exemptions through bank guarantees, and the introduction of the fintech license together create a structured approach to regulation. While comprehensive stablecoin legislation is not in place, regulatory guidance continues to shape market expectations and define compliance requirements.

Dubai (2022, 2024): Building a Global Innovation Powerhouse

Overview. The Dubai International Financial Centre (“DIFC”), a financial free zone in Dubai, established a regulatory framework for digital assets within the DIFC jurisdiction, covering licensing, financial crime prevention, custody, and exchange operations.^[10] Dubai has emerged as a leading jurisdiction for digital asset regulation, providing businesses with regulatory clarity and a structured licensing regime through the Dubai Financial Services Authority (“DFSA”).^[11] In 2021, the DFSA introduced its investment token regulatory regime, establishing a limited regime for security and derivative tokens for firms operating in the DIFC. Subsequently, the scope of the regime was broadened to include crypto tokens. In 2024,^[12] the DFSA amended this framework with additional money laundering and financial crime protections, consumer protection, technology governance, custody, and exchange operations rules, further cementing its position as a global hub for digital asset innovation.^[13]

Taxonomy. The DFSA framework defines tokens as cryptographically secured digital representations of value, rights, or obligations, including crypto tokens, which function as a medium of exchange, payment, or investment. The framework also sets token recognition criteria, assessing transparency, governance, liquidity, volatility, and risk-mitigation strategies to address cybersecurity, financial crime, and market abuse risks. Only DFSA-recognized tokens may be used within the DIFC, ensuring oversight and risk management.

Stablecoin regime. The framework also establishes strict criteria for single-fiat-backed stablecoins, requiring them to maintain price stability, be fully reserved, and undergo independent audits, with reserves held in segregated accounts at regulated financial institutions. To enhance market integrity, issuers must publicly disclose reserve holdings monthly and designate a responsible party for investor protection.

Services and markets regulation. The framework also regulates key financial services related to crypto tokens, including investment advisory, asset management, and custody services, dealing in crypto tokens as principal or agent, and operating a multilateral trading facility.

Summary. The DIFC continues to attract global digital asset firms seeking a stable, innovation-friendly jurisdiction by providing regulatory certainty and a sophisticated compliance framework.

European Union (2023): A Unified Approach

Overview. In 2023, the European Union (“EU”) enacted the Markets in Crypto-Assets Regulation (“MiCA”), establishing a comprehensive regulatory framework for digital assets across its twenty-seven member states.^[14] By providing legal certainty and harmonized oversight, MiCA aims to reduce market fragmentation, foster innovation, and enhance investor protection to make the European Union one of the most structured regulatory environments for crypto assets.

Taxonomy. MiCA distinguishes three types of crypto assets: e-money tokens, which are crypto assets that stabilize their value in relation to a single official currency; asset-referenced tokens, which are crypto assets that stabilize their value in relation to other assets or baskets of assets; and crypto assets other than e-money tokens or asset-referenced tokens.

MiCA also distinguishes utility tokens (crypto assets that are only intended to provide access to a good or a service supplied by its issuer) for certain select purposes, and excludes from their scope crypto assets that are unique and not fungible with other crypto assets, including digital art and collectibles (so-called non-fungible tokens, or NFTs). MiCA also excludes crypto assets that are already subject to certain existing EU regulatory frameworks (e.g., financial instruments), with the aim of avoiding duplicative regulatory burdens.

The regulation introduces clear transparency and disclosure requirements for those issuing or publicly offering crypto assets or seeking their admission on trading platforms. It also sets authorization and supervisory standards for crypto asset service providers and issuers of asset-referenced tokens and e-money tokens, ensuring that they operate within a structured and compliant framework. Additionally, the framework introduces robust investor protection measures, safeguarding asset holders and customers of digital asset businesses.

Stablecoin regime (e-money tokens). Issuers of e-money tokens that offer them to the public or seek trading platform admission must be authorized as a credit institution or e-money institution and comply with strict issuance and redemption rules. They are required to publish a white paper and marketing materials on their website, assuming liability for loss caused by any information that is not complete, fair, or clear, or that is misleading. Tokens must be issued at par value upon receipt of funds and are redeemable at any time at par value upon request. To safeguard customer funds, issuers of e-money tokens that are e-money institutions must deposit reserves with a credit institution (but can invest up to 30 percent of reserves in secure, low-risk assets denominated in the same currency as the e-money token). Notably, however, this requirement does not apply to issuers that are credit institutions. Additionally, both credit institutions and e-money institutions issuing e-money tokens must establish recovery and redemption plans to ensure stability in the event of operational distress.

Services and markets regulation. To promote financial stability and consumer confidence, MiCA establishes strict governance and operational requirements, mandating that issuers and service providers maintain sound business practices. To prevent market abuse, MiCA also includes provisions against insider trading, unlawful disclosure of information, and crypto market manipulation, with the aim of reinforcing trust in the sector.

Summary. MiCA offers a multijurisdictional digital asset regulation model that is integrated at a regional level and coordinated across countries. Its broad coverage is intended to provide an attractive environment for businesses seeking regulatory clarity and market access and cement the European Union’s status as one of the world’s most extensive frontiers on digital asset innovation.

Comparative Themes in Global Digital Asset Regulation

At the highest level, a well-structured regulatory framework must ensure consumer protection, market integrity, and financial stability while fostering responsible innovation.^[15]

Clear Digital Asset Taxonomies and Licensing Requirements

The foundational element of an effective digital asset regulatory framework is a clear and coherent taxonomy. Many jurisdictions have defined digital assets by type—payment tokens, utility tokens, asset-referenced tokens, or e-money tokens—to clarify legal treatment and regulatory scope. Jurisdictions such as Bermuda,^[16] Singapore,^[17] Switzerland,^[18] Dubai,^[19] and the European Union^[20] have each provided explicit classifications for digital assets, enabling businesses and investors to understand precisely the legal status and regulatory treatment of various digital asset types. This clarity ensures that only appropriately licensed digital assets circulate within these markets, supporting consumer protection and market integrity.

However, it is important to recognize that while these international jurisdictions have clear taxonomies, their individual frameworks vary significantly in scope, structure, and regulatory approach. For instance, most maintain separate regulatory frameworks specifically for stablecoins, though not all adopt the same policies. Some explicitly prohibit algorithmic stablecoins due to stability concerns, while others permit them under particular conditions. Similarly, privacy tokens are prohibited in certain jurisdictions but allowed in others. Furthermore, several regulatory regimes distinguish asset-referenced tokens—which maintain stability by referencing external assets—from stablecoins pegged directly to single-fiat currencies, acknowledging important functional differences among these digital assets.

A straightforward and legally enshrined taxonomy is essential to enable global businesses to seamlessly operate and innovate. While digital assets exhibit significant diversity, simplifying the taxonomy at the highest level allows regulatory agencies to craft targeted rules that effectively address different categories and their associated risks, while also providing sufficient flexibility to accommodate future technological innovation and new business models as they emerge.

By clearly defining digital asset classifications through law, a jurisdiction can proactively eliminate ambiguity, reduce the risk of reverting to regulation by enforcement, and provide greater certainty for market participants. Ultimately, this approach can foster a more stable environment, encourage responsible innovation, and support the launch and growth of future digital asset businesses.

Stablecoin-Specific Rules

Stablecoin regulations are also a critical pillar of a well-structured digital asset framework, ensuring financial stability, consumer protection, and market integrity. Leading jurisdictions such as Singapore, Dubai, and the European Union have implemented licensing requirements for stablecoin issuers, ensuring that only regulated entities can operate in their markets. To align with global standards and reinforce trust in digital asset markets, jurisdictions should require stablecoin issuers to be licensed by the appropriate regulatory authority before conducting business.

In addition to licensing, a robust regulatory framework should mandate 100 percent reserve backing by highly liquid assets to ensure stablecoin redemption and financial resilience. Singapore’s soon-to-be-implemented Stablecoin Regulatory Framework of 2023 requires redemption at par value within five business days,^[21] while the European Union’s MiCA e-money token rules grant a permanent right of redemption to strengthen consumer protections.^[22] Both frameworks impose strict reserve requirements and rigorous transparency standards to safeguard financial stability.

The DIFC has also taken steps to enhance its stablecoin oversight. While the DFSA previously required fiat-backed crypto tokens to maintain 80 percent of reserves in cash,^[23] this rule was recently updated. The new framework now mandates that reserves (a) be held in highly liquid, low-risk cash assets that are expected to maintain their value even under stress and (b) undergo daily valuation to ensure ongoing stability.^[24] Although the updated framework does not specify a fixed percentage for reserve holdings, its requirements effectively mandate that 100 percent of reserves be held in highly liquid, low-risk cash assets to ensure stability and resilience.

While Bermuda does not have a specific framework for stablecoins, it recognizes their growing importance.^[25] In May 2024, Bermuda introduced a draft, “Guidance on Digital Asset Business Single Currency Pegged Stablecoins (SCPS),” signaling a move toward establishing a structured framework. The proposed guidance outlines requirements for governance, risk management, market-making due diligence, backing assets, attestations, and disclosures, aiming to ensure that stablecoin issuers operate with financial integrity and transparency.^[26] These adjustments are intended to reinforce the resilience of stablecoins while maintaining regulatory flexibility.

Prohibition on Algorithmic Stablecoins

Algorithmic stablecoins lack asset backing and depend on self-regulating algorithms to maintain their value—an approach that has proven highly unstable. As I observed in my 2023 paper, A Comprehensive Approach to Crypto Regulation, an on-blockchain algorithm that facilitates changes in supply and demand between a so-called stablecoin and another cryptocurrency is not actually stable and is ripe for abuse.^[27] The collapse of TerraUSD (UST) in May 2022 wiped out billions in market value, exposing the risks of unbacked stablecoins. The fallout raised serious concerns about volatility, systemic risk, and potential fraud, prompting regulators worldwide to restrict or ban algorithmic stablecoins to protect financial stability.

Notably, algorithmic tokens are effectively banned in the European Union since they do not maintain explicit reserves tied to traditional assets and therefore do not fall within the categories of permitted crypto assets.^[28] Both algorithmic tokens and privacy tokens are banned in the DIFC.^[29] In Singapore, MAS has stated that “MAS views stablecoins which are algorithmically-pegged, unbacked, or backed by other cryptocurrencies to be more susceptible to volatility in value. Correspondingly, such stablecoins will continue to be treated as DPTs.”^[30] In practice, this classification may make it nearly impossible for an algorithmic stablecoin to meet Singapore’s stringent DPT licensing requirements, effectively preventing their issuance and use under the regulated framework.

Market Integrity and Anti–Money Laundering Controls

A comprehensive regulatory framework must include clear, enforceable rules for digital asset service providers, such as exchanges, broker-dealers, and trading systems. Some jurisdictions have established strict licensing, conduct, and prudential requirements to ensure market integrity. Singapore’s PSA, Dubai’s DFSA framework, and the European Union’s MiCA all impose robust obligations on service providers, requiring them to act honestly and fairly, maintain transparent fee structures, implement strong compliance programs, and safeguard client assets. These measures are not optional—they are essential to maintaining trust, preventing financial crime, and ensuring orderly markets.

All digital asset service providers should be subject to licensing and supervision, with strong governance and operational resilience requirements. They must prevent market abuse, manage conflicts of interest, and establish clear protocols for customer asset protection. Service providers should also be required to implement anti–money laundering (“AML”) controls, ensure separation of client and firm assets, and develop wind-down plans to mitigate systemic risk. Without these safeguards, digital asset markets will remain vulnerable to fraud, misconduct, and instability, putting investors and financial stability at risk.

Regulatory Clarity and Streamlined Supervision

A single, unified financial regulator may not be feasible in all countries, but it has afforded some jurisdictions a significant competitive edge in digital asset oversight. In Bermuda, the Bermuda Monetary Authority (“BMA”) serves as the primary regulator for digital asset businesses under DABA, overseeing licensing, supervision, and compliance.^[31] Singapore’s PSA framework benefits from the efficiency of having a single financial regulator, the Monetary Authority of Singapore (“MAS”), which oversees banking, securities, payments, and digital assets under a comprehensive framework. Supervision of digital assets in Switzerland is conducted by the Financial Market Supervisory Authority (“FINMA”), which applies a technology-neutral, risk-based approach under existing financial market laws.^[32] In the DIFC, the Dubai Financial Services Authority (“DFSA”) handles rules and supervision.^[33] Under MiCA, the European Securities and Markets Authority (“ESMA”) leads regulation and supervision unless the crypto asset is determined to be “significant,” in which case the European Central Bank regulates.^[34] A single, streamlined approach provides clarity for digital asset businesses, making it easier for firms to obtain licenses, comply with regulations, and operate confidently in a predictable environment.

For those jurisdictions with multiple financial regulators, it may be prudent to consolidate financial regulation under a single authority or at least streamline and clarify the existing regulatory framework. Essential components of this process include legal identification of a primary regulator for each type of digital asset business, undertaking interagency coordination, and avoiding conflicting actions.

Innovation Sandboxes and On-Ramps

Aligning regulation with innovation is critical to fostering growth, ensuring market integrity, and maintaining global competitiveness. Jurisdictions that provide regulatory clarity while supporting emerging technologies attract investment and establish themselves as industry leaders. Dubai exemplifies this approach, combining clear regulations, banking access, and innovation support.

For example, the DIFC enables controlled experimentation through its “Innovation Testing Licence.” The DIFC Innovation Licence is a commercial license with a subsidized fee structure open to technology and innovation firms interested in developing or testing new, novel, or innovative products. The license is subsidized for a period of two to five years at a rate of US$1,500 per annum and gives access to coworking space and discounted visas.^[35]

The DIFC Innovation Hub, which hosts more than 1,000 blockchain and tech startups, further accelerates growth, providing access to funding from venture capitalists, family offices, and institutional capital; running accelerator programs; offering business education; and training aspiring lawyers through the DIFC Academy.^[36] In its own words, “the DIFC is developing a trailblazing blockchain environment for companies at the cutting edge of innovation.”^[37]

Beyond policy, Dubai backs innovation with significant financial investment: “In 2024, Dubai ranked 7th globally for FDI [(‘foreign direct investment’)] in technology, with an inflow of over $1 billion, according to the Financial Times.”^[38] Dubai is also investing directly in blockchain applications. One notable example is DubaiPay,^[39] a blockchain-powered platform that has streamlined government payments and saved an estimated 5.5 million hours of paperwork annually.^[40] Dubai also benefits from its low tax environment for Free Zone Persons and its business-friendly policies, which have attracted significant FDI into its tech sector.^[41]

Pairing regulation with innovation also means proactively supporting initiatives to incorporate blockchain and digital asset technologies directly into financial infrastructure, particularly in critical functions such as clearing and settlement. My detailed analysis on this issue is set forth in the last main section of this article.

Enforcement and Deterrence Mechanisms

Jurisdictions worldwide are building deterrence and preserving regulatory integrity through strict enforcement mechanisms that impose significant penalties for noncompliance. Bermuda’s DABA prescribes fines of up to US$10 million and imprisonment of up to five years for regulatory breaches.^[42] In Switzerland, FINMA can withdraw the authorization of individuals and legal entities that no longer meet the authorization requirements or that have committed serious violations of supervisory law. Moreover, companies that fail to meet authorization requirements are liquidated.^[43] Singapore’s PSA mandates fines and imprisonment of up to three years for violations of digital asset licensing requirements.^[44] In Dubai, the DFSA imposes fines, public censures,^[45] and, for AML violations, up to ten years’ imprisonment.^[46] The European Union’s MiCA framework takes a different but strict approach, explicitly requiring exchanges to delist noncompliant tokens, effectively barring them from EU markets. In 2024, the European Union mandated the delisting of unregulated stablecoins, with a Q1 2025 enforcement deadline.^[47] While these enforcement approaches vary, they share common objectives: deterring misconduct, ensuring accountability, and reinforcing confidence in financial services.

In sum, jurisdictions should mandate strong and unyielding enforcement to preserve the integrity of their legal frameworks, create robust deterrents against bad actors and illicit activity, and protect consumers and the financial system from illegal operations. Doing so will also clearly define compliance obligations and consequences for violations.

Ongoing Industry Engagement and Cross-Border Cooperation

Ongoing industry engagement and cross-border cooperation are essential to maintaining an adaptive and credible regulatory framework.

Regulators should regularly consult with both digital asset firms and traditional financial institutions to monitor market developments, identify emerging risks, and determine whether new rules—or modifications to existing ones—are warranted. Bermuda provides a model for this approach: the BMA conducts annual consultations with industry participants to assess evolving practices and evaluate whether regulatory refinements are needed.^[48]

Cross-border cooperation is also critical for enabling seamless international business activity—so firms can operate efficiently across jurisdictions. To support this, Bermuda has established MOUs with other regulatory authorities that enhance supervisory coordination. These agreements facilitate regulatory cooperation, improve supervisory clarity, and support consistent oversight across borders.^[49]

Modernizing Global Financial Infrastructure: Central Clearing with Digital Assets

The impact of digital asset and blockchain technologies depends on their ability to enhance the financial system, improve efficiency, and meet the needs of consumers and institutions. As blockchain-based solutions evolve, so does their role in global finance, with significant advancements in payments, clearing, and settlement. One of the most notable developments is the integration of blockchain into wholesale payments infrastructure—an area where global competitors are making rapid progress.

An example of this integration can be found in Fnality, a blockchain-based wholesale payments firm backed by Lloyds Banking Group, Santander, and UBS. Utilizing an omnibus account at the Bank of England, Fnality successfully completed the world’s first live transactions using digital representations of central bank funds in December 2023. This milestone marks a significant step toward integrating blockchain into both mainstream financial infrastructure and tokenized markets.^[50] By enabling real-time wholesale payments backed by central bank money, Fnality aims to reduce cost and accelerate settlement times for financial markets, offering a more secure and efficient alternative to traditional clearing systems.

The rise of Fnality presents a strategic consideration for global financial-sector leadership. A successful shift toward central clearing through blockchain technology could reduce risk and increase efficiencies associated with trading, clearing, and settlement.

Some jurisdictions continue to explore ways to modernize financial infrastructure by supporting research and the application of blockchain- and digital asset–based clearing and settlement solutions. At least two hypothetical models exist:

1. Enhanced CCP Model. Central counterparties (“CCPs”) remain the hub of clearing, with USD-backed stablecoins or other digital assets facilitating margin posting and settlement. The core clearing structure—novation, margining, waterfall, and default fund—remains intact, but stablecoin wallets replace legacy payment rails. This would drive efficiency, cut costs, and improve settlement speed while preserving the CCP’s role in mutualizing counterparty risk.
2. Decentralized Settlement Model. Traders and institutions settle trades directly using USD-backed stablecoins or other digital assets on blockchain. Smart contracts or DLT could enable atomic clearing and real-time settlement without a CCP. Participants maintain the ledger and enforce rules, reducing reliance on systemically important financial institutions. However, this approach shifts risk and represents a far more disruptive transformation.

Developments in blockchain-based clearing and settlement are increasingly being considered within the broader context of digital asset regulation. As jurisdictions formalize oversight frameworks, many are also beginning to assess how these technologies may support future financial infrastructure. While implementation varies, the incorporation of digital assets into market plumbing reflects a shared interest in modernizing systems to meet evolving needs. These infrastructure applications form an adjacent, and often complementary, dimension to the regulatory themes discussed throughout this article.

Conclusion: Structural Convergence and Jurisdictional Variation

Across jurisdictions, regulatory frameworks for digital assets are increasingly defined by a set of common structural components. Asset taxonomies, stablecoin-specific regimes, market integrity provisions, streamlined supervision, and enforcement mechanisms are recurring features in the legal and institutional design of digital asset oversight.

While these components reflect a measure of convergence, their implementation remains jurisdiction-specific. Each framework reflects the legal architecture, market priorities, and supervisory traditions of the country or region in which it operates. Differences in scope, terminology, and regulatory authority continue to shape the regulatory landscape.

As the market matures, regulatory regimes are likely to remain dynamic. Ongoing refinements, jurisdictional coordination, and engagement with market participants will play an important role in shaping how digital assets are governed and integrated into the broader financial system.

The author would like to thank Allyson Ye and Ian Fox for their assistance with this article.

1. Digital assets are digitally native representations of value or rights that are transferred and stored using blockchain or similar technology. ↑

2. Digital Asset Business Act 2018 (2018) (Berm.) [hereinafter DABA]. ↑

3. Bermuda Monetary Authority Initiates Consultation on Proposed Changes to Bermuda’s Digital Asset Business Regime, Carey Olsen (Oct. 17, 2024). ↑

4. DABA, supra note 2, pt.1(2)(1), at 4–5:

   “[D]igital asset” means anything that exists in binary format and comes with the right to use it and includes a digital representation of value that—
   (a) is used as a medium of exchange, unit of account, or store of value and is not legal tender, whether or not denominated in legal tender;
   (b) is intended to represent assets such as debt or equity in the promoter;
   (c) is otherwise intended to represent any assets or rights associated with such assets; or
   (d) is intended to provide access to an application or service or product by means of distributed ledger technology[.] ↑

5. Digital Asset Business, Berm. Monetary Auth. (last visited June 23, 2025). ↑

6. Press Release, Berm. Monetary Auth., BMA MoU Wyoming Division of Banking (Feb. 8, 2021). ↑

7. Payment Services Act 2019 (rev. 2020) (Sing.) [hereinafter PSA]; Monetary Auth. of Sing., Payment Services Act 2019: Frequently Asked Questions (FAQs) on the Payment Services Act (PS Act) (Apr. 19, 2024). ↑

8. Press Release, Monetary Auth. of Sing., MAS Finalises Stablecoin Regulatory Framework (Aug. 15, 2023). Implementation of the stablecoin regulatory framework has not yet taken place but is expected soon. ↑

9. The S$3 million test revolves around monthly payment transactions that relate to fiat currency. ↑

10. This article only discusses the DIFC. While other jurisdictions within the United Arab Emirates (“UAE”) are also very important, they are not covered in this discussion. ↑

11. There are other regulators in addition to the DFSA that operate within the UAE, each with its own mandate and regulatory perimeter. ↑

12. Digital Assets Law DIFC Law No. 2 of 2024 (enacted Jan. 2024) (Dubai) [hereinafter DIFC Law]. ↑

13. Dubai Fin. Servs. Auth., DFSA Explainer: Regulation of Crypto Tokens (2019). ↑

14. Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets, and Amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 [hereinafter MiCA]. ↑

15. Anti–money laundering compliance and cybersecurity are also essential components of a well-regulated digital asset ecosystem. Ensuring that financial crimes are prevented and that digital infrastructure remains secure is critical to market integrity and consumer protection. While these issues are of paramount importance, they fall beyond the scope of this article, which focuses on regulatory clarity, consumer protection, market structure, and financial stability. ↑

16. DABA, supra note 2, pt. 1(2)(1), at 4–5. ↑

17. PSA, supra note 7, at pt. I, sched. 1.3. ↑

18. Swiss Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (Dec. 11, 2020). ↑

19. Dubai Fin. Servs. Auth., DFSA Rulebook, at General Module (GEN) [VER67/03-25] 3A.1.1 (2025). DFSA’s taxonomy includes the following:

    • “‘Algorithmic Token’ means a Crypto Token which uses, or purports to use, an algorithm to increase or decrease the supply of CryptoTokens in order to stabilise its price or reduce volatility in its price.” Id. at 3A.1.1(a).
    • “‘Privacy Token’ means a Crypto Token where the Crypto Token or the DLT or other similar technology used for the Crypto Token has any feature or features that are used, or intended to be used, to hide, anonymise, obscure or prevent the tracing of any of the information referred to in (c)(i) to (vi) [which relates to privacy devices].” Id. at 3A.1.1(d).
    • “Recognised Crypto Token” includes recognized fiat crypto tokens, for which financial services can be carried on in the DIFC subject to regulatory requirements. Id. at 3A.1.1(e).
    • Unrecognized crypto tokens are those for which financial services cannot be carried out in the DIFC until recognized by the DFSA. Id.
    • Prohibited tokens are privacy tokens and algorithmic tokens, which are prohibited in the DIFC. Id.

    See also Dubai Fin. Servs. Auth., DFSA Explainer: Regulation of Crypto Tokens (2019). ↑

20. MiCA, supra note 14. MiCA’s taxonomy includes the following:

    • “‘[C]rypto-asset’ means a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledge technology or similar technology.” Id. art. 3(5).
    • “‘[A]sset-referenced token’ means a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies.” Id. art. 3(6).
    • “‘[E]lectronic money token’ or ‘e-money token’ means a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency.” Id. art. 3(7).
    • “‘[U]tility token’ means a type of crypto-asset that is only intended to provide access to a good or service supplied by its issuer.” Id. art. 3(9). ↑

21. Press Release, Monetary Auth. of Sing., supra note 8. Implementation of the stablecoin regulatory framework has not yet taken place but is expected soon. ↑

22. MiCA, supra note 14, art. 51(6). ↑

23. The DFSA defines fiat crypto tokens as those tokens that are typically pegged to a fiat currency and backed by reserve assets denominated in the peg currency. Dubai Fin. Servs. Auth., Consultation Paper No. 153: Updates on the Regulation of Crypto Tokens, at pt. II(iv)(20)–(24) (Jan. 4, 2023) (“Fiat Crypto Token recognition criteria”). ↑

24. Id. In addition to the standard recognition criteria for all crypto tokens set out in the DFSA Rulebook’s General Module 3A.3.4, where the DFSA looks at, for example, the regulatory status, transparency, market depth, technological resilience, and other risks related to a crypto token, the DFSA added additional criteria for fiat crypto tokens. ↑

25. Notice, Berm. Monetary Auth., Digital Asset Business Single Currency Pegged Stablecoins (SCPS) Consultation Guidance (May 10, 2024). ↑

26. Id. ↑

27. Brett Hemenway Falk & Sarah Hammer, A Comprehensive Approach to Crypto Regulation, 25 U. Pa. J. Bus. L. 415, 431–32 (2023). ↑

28. Anna Mileiko, Stablecoins and MiCA: Regulations and Examples in the EU, TheBanks.eu (Nov. 13, 2024). ↑

29. Dubai Fin. Servs. Auth., supra note 13. ↑

30. Monetary Auth. of Sing., Consultation Paper: Proposed Regulatory Approach for Stablecoin-Related Activities, at para. 3.5 (Oct. 2022) (“A wide range of stablecoins currently exist, varying in terms of their asset pegging, as well as the mechanism that upholds the stability of the stablecoins’ value against the pegged asset(s). MAS intends to focus its regulatory regime on: Single-currency pegged stablecoins (SCS)—As compared to other types of stablecoins (such as those pegged to a basket of currencies or other assets such as commodities), SCS has a stronger use case for payment and settlement. Non-SCS will continue to be subject to the existing DPT regime under the PS Act. MAS views such stablecoins as being less stable in nominal value and should be treated differently from SCS. In addition, even among SCS, there is variation in the stabilisation mechanism. MAS views stablecoins, which are algorithmically pegged, unbacked, or backed by other cryptocurrencies, to be more susceptible to volatility in value. Correspondingly, such stablecoins will also continue to be treated as DPTs.”). ↑

31. DABA, supra note 2, pt. 1(4), at 9. ↑

32. Enforcement: Licence Holders, FINMA (last visited June 23, 2025). ↑

33. DIFC Law, supra note 12, at 10. ↑

34. Where asset-referenced and e-money tokens are labeled as “significant,” the European Banking Authority takes over the supervisory role. MiCA, supra note 14, at 103. ↑

35. Innovation Licence, DIFC (last visited June 23, 2025). ↑

36. DIFC Ecosystem, DIFC (last visited June 23, 2025). ↑

37. The Global Blockchain Ecosystem Is Growing in Dubai’s International Financial Centre, DIFC (Dec. 5, 2022). ↑

38. Dubai’s Leadership in Blockchain and AI: Creating a Global Hub for Crypto and Tech, Code X Team (Oct. 9, 2024). ↑

39. DubaiPay, Gov’t of Dubai (last visited June 23, 3035). ↑

40. Dubai’s Leadership in Blockchain and AI, supra note 38. ↑

41. Id. ↑

42. DABA, supra note 2, pt. 5(39)(1), at 31 (“Disciplinary Measures”); DABA, supra note 2, pt. 2(10)(3), at 13 (“Licensing”). Notably, Bermuda’s statute explicitly references imprisonment in multiple sections, reinforcing the seriousness of noncompliance. See, e.g., DABA, supra note 2, pt. 2. 10(3)(a)–(b), at 13; pt. 4(37)(5)(b), at 30; pt. 5(43)(9)(a)–(b), at 33; pt. 6(51)(5)(a)–(b), at 37. In addition to financial and criminal penalties, Bermuda also authorizes public censures, prohibitions, and injunctions against violators, ensuring strong deterrence. DABA, supra note 2, pt. 5, at 31–34 (“Disciplinary Measures”). ↑

43. Federal Act on the Swiss Financial Market Supervisory Authority (Financial Market Supervision Act, FINMASA) art. 37, para. 3; see also Withdrawal of Authorisation, Liquidation, and Bankruptcy, FINMA (last visited June 23, 2025). ↑

44. PSA, supra note 7, pt. 2(5)(3)(a) (“Licensing of Payment Service Providers”). ↑

45. About Enforcement, DFSA (last visited June 23, 2025). ↑

46. Adam Vause, Laura Shingler & Celia Johnson-Morgan, Anti–Money Laundering: United Arab Emirates, DLA Piper (Feb. 27, 2023). ↑

47. Public Statement, Eur. Sec. & Mkts. Auth., On the Provision of Certain Crypto-Asset Services in Relation to Non-MiCA Compliant ARTs and EMTs (Jan. 17, 2025); Clickout, ESMA Pushes for Delisting of Non-MiCA Compliant Stablecoins, Sets Q1 2025 Deadline, Benzinga (Jan. 20, 2025); Helen Parts, Kraken to Delist Tether’s USDT, 4 Other Stablecoins in Europe, Cointelegraph (Feb. 1, 2025). ↑

48. Interview with Senior Adviser, BMA (Mar. 26, 2025). ↑

49. Press Release, Berm. Monetary Auth., supra note 5. ↑

50. Press Release, Fnality Press Off., Fnality Commences Initial Phase of Sterling Payment Operations in a World-First for Both Wholesale Finance and Digital Asset Markets (Dec. 14, 2023). ↑

Canadian M&A entered 2025 under pressure, tariffs on the horizon, inflation still biting, and the lowest deal count in two decades. Yet by mid-year, value had surged. Dealmakers describe a selective but busy market driven by a handful of large energy and infrastructure transactions.

M&A deal value in Canada increased sharply in the first half of 2025, reaching approximately CA$113.7 billion (a nearly 70 percent year-over-year increase). However, overall transaction volume remained flat at roughly 511 deals, reflecting a market focused on fewer, larger, and more strategic transactions.

Market confidence improved after a cautious first quarter. Dynamics early in the year were shaped by inflation, uncertainty surrounding foreign investment, and valuation friction. By late spring, these pressures eased, unlocking a series of new and previously delayed transactions.

This mix of concentrated value and cautious execution is shaping how buyers and sellers approach the rest of the year. Here’s where momentum is building for H2 2025, and the conditions that will separate winners from the pack.

Sector Trends

Energy was a leading sector by value in H1 2025, driven by both traditional and transition-focused assets. While traditional oil and gas consolidation continued, there was a notable shift toward infrastructure-aligned and transition-facing energy assets, such as storage, logistics, and grid-scale platforms. The sector attracted ongoing foreign investment due to predictable, long-term returns and stable regulatory regimes, though transactions in this sector can carry heavier regulatory requirements, Indigenous engagement, and approval risk allocation in the purchase agreement.

Technology remained the most active sector by volume, with transactions focused mainly on mid-market software-as-a-service (“SaaS”) and digital infrastructure companies. SaaS and digital infrastructure companies provide attractive opportunities to U.S. sponsors and corporates seeking steady revenue and scalable models. A limited IPO window reinforced private transactions as the preferred exit.

Mining M&A was subdued early in the year. Q2 saw larger transactions by deal size but fewer deals. Other sectors, including healthcare and logistics, saw continued interest in platform assets with high-margin, regulated, or repeatable revenue profiles.

Private Equity: Process, Structures, and Exits

Private-equity (“PE”) activity in H1 2025 mirrored the overall market pattern, with higher dollar volumes but fewer transactions. Sponsor-led buyouts totaled CA$18.1 billion, up 65 percent year-over-year, although the number of deals shrank substantially. While some firms paused new acquisitions early in the year, dealmakers report increased mid-market opportunities in a less competitive environment than the low-cost-capital years of 2021–2022.

With public markets subdued and limited IPO activity, some general partners prioritized sponsor-to-sponsor transactions and strategic exits for scaled assets. Continuation vehicles and secondaries provided flexibility in sectors where capital interest persisted, though fund-level liquidity constraints continued to slow exit timelines.

Deal activity was concentrated on transactions with clear integration pathways and durable EBITDA profiles. Fewer full auction processes were seen; many transactions occurred through bilateral outreach or preemptive approaches, especially where the buyer and seller were aligned.

Private credit played a key role in supporting private equity activity. Sponsors utilized unitranche, holding company, and hybrid capital structures to navigate tighter lending markets. In transactions for companies valued under CA$500 million, the ability to access and commit capital quickly often determined which bidder succeeded. Sellers prioritized buyers who could close with speed and certainty, making capital readiness a true differentiator.

Cross-Border Activity

Cross-border M&A accounted for close to 50 percent of Canadian deal activity in H1 2025. Inbound deal flow softened in Q1 due to trade-related tension and political developments abroad, but by Q2, buyer confidence largely returned, particularly in sectors offering long-term asset profiles.

Cross-border activity in H1 2025 reflected a more selective environment. Inbound deals from the United States fell below 100, with 97 transactions worth CA$24.8 billion. Trade-policy uncertainty, particularly proposed U.S. tariffs, has prompted Canadian counterparties to explore structures such as earnouts, spin-offs, and targeted divestitures to navigate cross-border execution risk.

Outbound activity increased, as Canadian funds and strategics sought acquisitions in the U.S. and Europe, motivated by valuation alignment and diversification. Some acquirers acted to build behind the tariff wall, anticipating long-term changes in trade and industrial policy. Foreign investment review remained a critical diligence factor, but proactive engagement and structural planning kept most cross-border processes on track.

Transaction Conditions and Process Dynamics

Market conditions for completing transactions improved in Q2. Valuation gaps narrowed across several sectors as interest rate expectations stabilized and capital availability became clearer. Transaction timelines remained tight, but deal teams operated with greater certainty than in 2023.

Private credit continued to support deal activity. With traditional lending still selective, sponsors and strategics turned to net asset value (“NAV”) credit facilities, multilender syndicates, and holdco debt to close transactions on tight timelines. Success often depended on the speed of the due diligence process and the availability of committed capital.

Limited auctions, preemptive outreach, and insider-led processes were common. Prepared sellers—with clean financials, ready diligence materials, and structural flexibility—were best positioned to transact.

Outlook for H2 2025

Canadian M&A is entering the second half of 2025 with strong momentum. Political headwinds have eased, interest rates are stable, and buyer-seller expectations are more closely aligned. For well-prepared participants, market conditions remain favorable.

Mining and critical minerals are expected to be more active as regulatory clarity improves and federal permitting frameworks mature. Technology and business services should continue to drive volume, with private equity and cross-border strategics focused on platform roll-ups and carve-outs.

Liquidity pressures will persist for private equity, but M&A remains the primary exit route. Secondary transactions, strategic divestitures, and sponsor-to-sponsor deals are expected to comprise the bulk of PE-led sell-side activity in H2.

Infrastructure and transition-aligned energy will remain central for buyers seeking long-duration assets and stable cost profiles. Early regulatory planning and capital certainty will be essential for success in cross-border deals.

Conclusion

As Canadian M&A enters the second half of 2025, the market is defined by competition for quality assets and a premium on speed, preparation, and certainty. Buyers who were deliberate and ready to transact were rewarded in H1.

The true competitive advantage will likely go to deal teams that are prepared to move quickly and manage complex cross-border diligence.

With the signing of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the “GENIUS Act,” into law, the United States has officially established a first-of-its-kind regulatory framework for “payment stablecoins” and the entities that issue them.

The law introduces a clear gatekeeping model: Only entities recognized as “permitted payment stablecoin issuers” and qualifying foreign issuers may issue payment stablecoins in the United States once the law takes effect, which will be no later than January 2027. This change brings both clarity and constraints, particularly for nonbank companies looking to enter the space.

For companies formulating or evaluating their stablecoin strategy, the GENIUS Act presents an important decision point: how to enter the market compliantly, at what scale, and under which regulatory regime.

GENIUS Act Background

The GENIUS Act is a tailored measure aimed at regulating a specific slice of the digital asset market. The provisions of the GENIUS Act apply only to “payment stablecoins,” which are digital assets that meet the following criteria:

• used or designed for use in payments or settlement;
• where the issuer is obligated to convert, redeem, or repurchase the stablecoin for a fixed amount of monetary value; and
• where the issuer represents that the stablecoin will maintain, or creates the reasonable expectation that it will maintain, a stable value relative to a fixed amount of monetary value.

The GENIUS Act permits payment stablecoins to be issued in the United States only by “permitted payment stablecoin issuers.” This ability to issue payment stablecoins also comes with restrictions and obligations:

• Under the GENIUS Act, a permitted payment stablecoin issuer may engage only in the following activities: (i) issuing payment stablecoins; (ii) redeeming payment stablecoins; (iii) managing related services, such as purchasing, selling, holding reserve assets, or providing custodial services for reserve assets; and (iv) providing custodial services for payment stablecoins, required reserves, or private keys of stablecoins.
• The core GENIUS Act standards include requirements for a permitted stablecoin issuer to: (i) fully back payment stablecoins with reserves consisting of specified assets that are highly liquid, such as U.S. currency, funds held as demand deposits, and Treasuries; (ii) publicly disclose redemption policies; and (iii) publish the composition of reserves on a monthly basis.

Payment Stablecoin Issuance Paths

The following table outlines the three forward-looking payment stablecoin issuance paths available to nonbank companies under the GENIUS Act, each allowing issuers to remain outside the maximalist regulatory regime that applies to commercial banks.

• Path 1: Take the Federal-Qualified Path as a National Trust Bank
  Create a subsidiary that obtains a national trust bank charter from the Office of the Comptroller of the Currency (“OCC”) and, as an uninsured depository institution, applies for approval with the OCC to become a “federal qualified nonbank payment stablecoin issuer.”
• Path 2: Take the Federal-Qualified Path for Nonbank Companies
  Create a subsidiary that is a nonbank company and applies for approval with the OCC to become a “federal qualified nonbank payment stablecoin issuer.”
• Path 3: Take the State-Qualified Path
  Create a subsidiary that could be a nonbank company and applies for approval with a state regulator to become a “state qualified payment stablecoin issuer.”^[1]

The GENIUS Act specifies that payment stablecoins meeting its terms are excluded from the definition of a “security” under the federal securities laws and “commodity” under the Commodity Exchange Act, effectively removing them from regulation by the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”). This does not apply, however, to digital assets that are not payment stablecoins, such as those that pay yield or interest solely in connection with holding or using the stablecoin.^[2]

While the GENIUS Act provides a foundational framework, many key details—particularly with respect to regulatory implementation, state-federal coordination, and foreign stablecoin issuer eligibility to access the U.S. market—remain to be clarified. Prospective payment stablecoin issuers should plan with flexibility and monitor developments closely.

1. The state’s regulatory regime must be certified as “substantially similar” to the federal regulatory framework under the GENIUS Act by the Stablecoin Certification Review Committee, which is to be chaired by the secretary of the Treasury and includes the chair of the Federal Reserve Board and the chair of the Federal Deposit Insurance Corporation as members. ↑

2. The federal banking agencies, SEC, and CFTC are tasked with issuing a study of non-payment stablecoins. Congress is separately considering proposed legislation that would apply to certain other types of digital assets. ↑