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Message: <blockquote data-quote="ELA" data-source="post: 12728" data-attributes="member: 1562">Hi everyone!See below our second Commercial Awareness Update for the month of August.Commercial News Update: 14th August 2019Topics covered this week are:1. Apple Begins Release of its New Apple Card ([USER=2115]@LJ[/USER])2. Elizabeth Warren’s “Stop Wall Street Looting Act” ([USER=1562]@ELA[/USER])3. Investment Bank Job Cuts ([USER=1160]@Alice G[/USER])4. Uber’s Shares Tumble ([USER=1550]@Sairah[/USER])5. China's Currency Devaluation ([USER=1643]@Moni[/USER])*********************************************************************************************************1. Apple Begins Release of its New Apple Card ([USER=2115]@LJ[/USER])The Story Last week Apple and Goldman Sachs quietly released their new Apple Card to a select few customers who had registered interest in the product previously. Apple Card is a virtual credit card working through Apple Pay, offering up to 3% cash back. While virtual, consumers can request a heavy-weighted titanium physical card. The product is supported by Goldman (and Mastercard, who is in charge of managing transaction data, payment disputes and the general infrastructure).Impact on Businesses and Law FirmsApple Card is being seen by many as a way to establish a new profit stream for both Goldman and Apple. In the recent third quarter iPhone sales dropped, now accounting for less than half of Apple’s revenues. The Apple Card was ultimately an expected move from Apple, after releasing Apple Pay and their wallet app. Likewise, Goldman’s securities trading has been slowing, as the firm recently made moves into consumer finance by developing a consumer bank, Marcus, in 2015. It is hoped therefore that the Apple Card can help overcome the slowing of these previous profit engines by providing a new consistent stream of revenue.Corporate lawyers will be playing an important role in determining how the two titans are going to work together. They are both performing very distinct roles in the delivery of the Apple Card. Indeed, it is far more than a Goldman card with an Apple face. Reportedly, Apple has been working directly with Goldman staff. The structure of this relationship, in the context of such differing corporate cultures, is an interesting element of this story to follow.Goldman is also approving ‘subprime’ applicants for Apple Card. After Goldman paid a $5.1 billion settlement in 2016 to the Department of Justice for defrauding investors during the subprime mortgage crisis, there may be calls for more stringent approval procedures here. This is of course another area corporate lawyers will play a pivotal role.2. Elizabeth Warren’s “Stop Wall Street Looting Act” ([USER=1562]@ELA[/USER])The StoryUS democrat Elizabeth Warren recently published a piece of draft legislation titled the “Stop Wall Street Looting Act”, which mentions making private equity firms responsible for the debts of the companies they own.Impact on Businesses and Law FirmsSuch a proposal is not within the scope of mainstream Democratic or Republican thought and is unlikely to become law. Nonetheless, it feeds into the debate surrounding the ethics of private equity and questions one of the foundational principles of business-making: limited liability. These topics could be relevant for training contract interviews.Limited liability means that company directors and shareholders are only liable for the amount they have themselves invested in the company if it fails. Dating back to the early 19th century, limited liability enabled investors to take more risks and spurred capital raising and entrepreneurialism.Private equity firms typically use a small proportion of their own funds and a large amount of borrowed money to acquire private companies. Thanks to limited liability, they are only liable for the small amount they have invested, and the large debt is pushed down onto the acquired company. Consequently, private equity has been criticised for letting dealmakers prosper while employees risk suffering from measures put in place to service the heavy debts target companies are under following their acquisition.  Such measures may include the sale of assets or parts of a company, subsequent redundancies, or reduced investments (see, for instance, the Toys R Us liquidation story).Warren may think, therefore, that the principle of limited liability is being abused and enables financiers to insulate themselves from the financial risks associated with their decisions. On the other hand, defenders of private equity have argued that abolishing limited liability for private equity firms while leaving it in place or other businesses would simply push investors to acquire companies through different contractual guises. In any case, Warren’s proposal draws attention to the tension between corporate/financial growth and corporate responsibility.3. Investment Bank Job Cuts ([USER=1160]@Alice G[/USER])The Story:Since the start of April, major investment banks such as HSBC, Barclays, Société Générale, Citigroup and Deutsche Bank have announced job cuts amounting to almost 30,000 in total for the sector, the majority of which have been made within Europe. There are several reasons attributed to the cuts which vary from bank to bank, but the major ones include:1.      The increasing pile of debt paying negative interest rates. This significantly affects the profitability of investment banks and in order to protect profits, they have had to make redundancies.2.      Automation within the industry. Computers, software and algorithms are now able to make investments in the same way human bankers would. With the need to protect profits and cut costs, the automation of the sector is making this even easier.3.      Banks are set to embrace the so-called Basel IV-rules, which will increase the capital requirement of banks (the implementation of these new regulatory rules are to increase stability and confidence in the banking system). But this will make trading less profitable for banks when it comes into force in 2022, and many are therefore making cuts now to mitigate these potential future losses.4.      Brexit and trade war uncertainty are also cited as reasons because these factors have been causing disruption to the sector as well.Impact on Businesses and Law Firms:One point to note from this story is the issue of automation. Yuval Noah Harrari has been particularly vocal about how automation, robots and algorithms threaten to make human bankers and lawyers redundant and these reports seem to bolster his pessimistic theory for the future of big business. Despite HSF’s Damien Byrne Hill citing his disbelief that judges can be replaced by robots in the future in a recent article in The Lawyer, these reports do provide us with food for thought as to the future of the City.</blockquote>

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