• Swap Dealer Definition.

On March 29th, Reuters discussed the efforts of the CFTC and SEC to define "swap dealer." Two lawmakers wrote to CFTC Chairman Gary Gensler urging a narrow definition that excluded end users. Additionally, the CFTC and SEC have been discussing possible dollar thresholds that might be used to determine who is a swap dealer. Swap Dealer Definition.

• Hotline Tips.

On March 29th, CFO.com summarized the results of a recent survey that found that employee tips reporting suspected fraud to internal corporate hotlines are at an all-time high. Internal Tips.

• MF Global Hearings.

On March 28th, the House Oversight and Investigations Subcommittee held hearings on MF Global, whose October 2011 collapse has raised questions concerning the protection of customer money. In her prepared remarks MF Global's general counsel Laurie Ferber described the days and hours preceding the firm's bankruptcy filing, including the two wire transfers that some have seen as evidence that the firm improperly used customer money, and about which JP Morgan (the ultimate recipient of the funds), had questions. Ferber Prepared Remarks. MF Global Inc.'s CFO Christine Serwinski explained how the firm's contribution to the buffer meant to protect customer money ran a deficit, was reconciled, declared an accounting error, and finally became a $1 billion under-segregation. Serwinski Prepared Remarks. See also Hearing Webpage (with links to archived webcast and prepared testimony). Reuters reported that MF Global's Assistant Treasurer, Edith O'Brien, who might know key details concerning the under-segregation, asserted her Fifth Amendment rights and declined to answer the subcommittee's questions. Fifth Amendment. On March 29th, the New York Times discussed the legal maneuverings that may be occurring with respect to O'Brien's testimony. Immunity. See also CFO.com (summarizing events).

• The JOBS Act.

The Washington Post, on March 27th, and the San Francisco Chronicle, on March 29th, published analyses of the JOBS Act, the recently passed bill meant to ease small company capital formation.

• BATS' Bad Day.

On March 26th, Bloomberg discussed Bats Global Markets troubled debut. The electronic market was forced to cancel its initial public offering after a coding error made it impossible for it to trade its own shares on its BATS Exchange and caused a momentary 9 percent plunge in the price of Apple Inc. shares. The problem confirmed the concerns some hold regarding electronic exchanges. Debut.

• House Committee Passes Two Dodd-Frank Act Measures.

On March 27th, the House Financial Services Committee passed H.R. 3283, the Swap Jurisdiction Correction Act. The bill would limit the extraterritorial reach of the Dodd-Frank Act by exempting swap transactions between the foreign affiliates of U.S. firms and their affiliates' foreign clients from the Act's clearing, trading, and collateral requirements. The Committee also passed H.R. 4235, the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2012. The bill would repeal the Dodd-Frank Act provision that requires any U.S. or foreign authority, other than the SEC, seeking to obtain security-based swap data from an SEC-registered security-based swap data repository to agree to provide indemnification to the repository and the SEC for any expenses arising from litigation relating to the information provided.

• OCC Releases Fourth Quarter Mortgage Metrics Report.

On March 28th, the OCC released its Mortgage Metrics Report for the Fourth Quarter of 2011. The performance of first-lien mortgages serviced by large national and federal savings banks changed very little during the fourth quarter of 2011 and showed improvement from the previous year. OCC Press Release.

• Treasury Department Designates Syrian Government Officials.

On March 30th, the Treasury Department announced the designations of three senior officials of the Government of Syria: Syria's Minister of Defense Dawood Rajiha, Syria's Deputy Chief of Staff of the Army Munir Adanov and Syria's Head of Presidential Security Zuhayr Shalish. U.S. persons are generally prohibited from engaging in transactions with any of the designees and any assets they may have subject to U.S. jurisdiction are frozen. Treasury Department Press Release.

• FinCEN Issues Advisory on Tax Refund Fraud.

On March 30th, the Financial Crimes Enforcement Network ("FinCEN") issued an Advisory to assist financial institutions with identifying tax refund fraud and reporting the activity through the filing of Suspicious Activity Reports ("SARs").

• Reports Available for E-Filing.

On March 29th, FinCEN announced that the new SAR and Currency Transaction Reports are now being accepted through the electronic filing system. FinCEN also issued guidance intended to assist institutions filing the new reports. In addition, FinCEN issued updates to the Electronic Filing Requirements for FinCEN's Currency Transaction Report and the Electronic Filing Requirements for FinCEN's Suspicious Activity Report. It has made the Designation of Exempt Person report available for E-Filing and is issuing Electronic Filing Requirements for FinCEN's Form 110, Designation of Exempt Person. FinCEN Press Release.

• Iran Sanctions.

On March 27th, the Treasury Department announced the designation of the Iranian cargo airline, Yas Air; Behineh Trading; three Iranian Islamic Revolutionary Guard Corps-Qods Force officials; and one Nigerian shipping agent for acting for or on behalf of, or providing support to, the IRGC-QF, a designated terrorist entity. Treasury Department March 27, 2012 Press Release. On March 28th, the Treasury Department announced additional sanctions against two entities connected to the network of the Islamic Revolutionary Guard Corps and two individuals and two entities affiliated with Iran's national maritime carrier, the Islamic Republic of Iran Shipping Lines. Treasury Department March 28, 2012 Press Release.

• CFPB Files TILA Amicus Brief.

On March 27th, the Consumer Financial Protection Bureau announced it has filed an amicus brief in the United States Court of Appeals for the Tenth Circuit arguing that certain borrowers who did not receive certain disclosures mandated by the Truth in Lending Act may cancel their loans so long as they notify the lender of their intent to cancel within three years. CFPB Press Release.

• Banking Agencies Propose Revisions to the Interagency Leveraged Finance Guidance.

On March 26th, the Federal Reserve Board, FDIC, and OCC published for comment proposed revisions to the interagency leveraged finance guidance issued in 2001. Transactions that are covered by this guidance are characterized by a borrower with a degree of financial or cash flow leverage that significantly exceeds industry norms as measured by various debt, cash flow, or other ratios. In light of the market's evolution, the agencies propose replacing the 2001 guidance with revised leveraged finance guidance that refocuses attention to five key areas: establishing a sound risk-management framework; underwriting standards; valuation standards; pipeline management; and reporting and analytics. Comments should be submitted on or before June 8, 2012. Joint Press Release.

• CFTC Advisory on Bona Fide Hedging.

On March 27th, the CFTC's Division of Market Oversight issued an Advisory regarding the treatment of bona fide hedging transactions and positions under CFTC Regulations 1.3(z), 1.47, and 1.48 as they existed prior to the adoption of the final rule addressing Position Limits for Futures and Swaps. The Division issued the Advisory to remind market participants that regulations 1.3(z) and 1.48 will continue to apply to position limits under the CFTC's part 150 regulations until 60 days after the CFTC and the SEC jointly publish rules further defining the term "swap." After the term "swap" is further defined, the bona fide hedging provisions under regulation 151.5 in the final rule for Position Limits for Futures and Swaps will apply to exempt and agricultural commodities and regulation 1.3(z) will apply to excluded commodities. The Advisory also clarifies that no new exemptions will be granted under regulation 1.47. Furthermore, as provided in regulation 151.9(d), any relief granted under regulation 1.47 for swap risk management will not apply to any new swap positions entered (including positions which extend a swap with the same counterparty) 60 days after the term "swap" is further defined. CFTC Press Release.

• CFTC Advisory on Special Call Authorities.

On March 27th, the CFTC's Division of Market Oversight issued an Advisory highlighting the CFTC's special call authorities relating to claimed exemptions from speculative position limits under 17 CFR parts 150 and 151. The Advisory reminds those market participants claiming a bona fide hedge exemption from the speculative position limit rules that the CFTC and the Division may use the special call authorities to request information related, but not limited, to positions owned or controlled by the person claiming the exemption; trading done pursuant to the claimed exemption; any swaps, futures, options, or cash market positions which support the claim of exemption; relevant business relationships supporting a claim of exemption; their related cash, futures, and swaps positions and transactions; and in certain instances, a list of pass-through swap counterparties for pass-through swap exemptions under 17 CFR § 151.5(a)(3). CFTC Press Release.

• Singapore Exchange's Euro Stoxx 50 Index Futures Contract Approved for Trading.

On March 27th, the CFTC announced that the Division of Market Oversight has approved Singapore Exchange Derivatives Trading Limited's Euro Stoxx 50 Index futures contract for trading through its direct access terminals in the U.S. CFTC Press Release.

• Comment Sought on Cross-Margining Request.

On March 23rd, the CFTC requested comment on a petition submitted by New York Portfolio Clearing, LLC, a registered derivatives clearing organization, for an order pursuant to Section 4d(a)(2) of the Commodity Exchange Act. The petition requests an order that would permit NYPC to expand its existing one-pot cross-margining program with Fixed Income Clearing Corporation to include positions and related money, securities and property held by NYPC clearing members and clearing members of FICC's Government Securities Division for participating "market professionals." Comments should be submitted on or before April 23, 2012. CFTC Press Release.

• Broker and Adviser Harmonization.

On March 30th, Reuters summarized a recent letter sent to the SEC by a coalition of consumer and trade groups concerning the agency's attempt to harmonize the duties of brokers and investment advisers. Harmonization.

• SEC Examining ETN.

On March 29th, Bloomberg reported the SEC is investigating Credit Suisse's VelocityShares Daily 2x VIX Short-Term ETN after the derivative's value almost doubled then plunged. The SEC's action follows the European Commission's announcement that it is inquiring into possible conflicts of interest related to the ETN. SEC Investigation. Reuters reported the Financial Industry Regulatory Authority is also examining the Credit Suisse product as well as other ETNs. FINRA is particularly interested in how the securities are marketed to investors. FINRA Investigation.

• Updated EDGAR Filer Manual.

On March 26th, the EDGAR system was updated to Release 12.0 and the EDGAR Filer Manual updated to share the appropriate information with the filers. The revisions primarily support the upgrade to the 2012 US GAAP and 2012 Mutual Fund Risk/Return Summary Taxonomies; support period field validation updates for Form N-PX; remove the OMB expiration date from Form D, 3, 4, and 5; and include additional filer support fax numbers on various EDGAR Filer Management Website screens. In addition, the revised File Manual also provides address changes related to the conversion of the DOS-based Form N-SAR application to an online application in EDGAR Release 12.1.1 (July 09, 2012). The updated Filer Manual is effective immediately. SEC Release No. 33-9303.

• Amendments to CDS Clearing Rules Proposed.

On March 22nd, the SEC provided notice of the Chicago Mercantile Exchange's filing of a proposed change to CME Rule 8H07.1 applying to the allocation of the CDS guaranty fund among CDS clearing members. Currently the CDS Guaranty Fund is calculated monthly and is proportionally allocated to each CDS Clearing Member on the basis of its 90-day trailing average of its potential residual loss and 90-day trailing average of its gross notional open interest outstanding at CME. CME is proposing to change the measurement period from 90 days to 30 days in order for the CDS Guaranty Fund to more quickly react to a CDS Clearing Member's current activity and to align the measurement period with the frequency of CDS Guaranty Fund calculations. Comments should be submitted on or before April 19, 2012. SEC Release No. 34-66646.

• FINRA Fees.

On March 27th, the Financial Industry Regulatory Authority announced that effective April 2, 2012, FINRA is increasing qualification examination fees, and assessing a service charge for any Regulatory Element Continuing Education session taken in a test center located outside the territorial limits of the U.S. FINRA Regulatory Notice 12-16.

• Profit Rate Swap Standard for Islamic Hedging.

On March 27th, the International Islamic Financial Market and the International Swaps and Derivatives Association announced the launch of the ISDA/IIFM Mubadalatul Arbaah (Profit Rate Swap) product standard to be used for Islamic hedging purposes. ISDA Press Release.

• SEC to Review Disapproval of Proposed Rule Change to Link Market Data Fees and Transaction Execution Fees.

On March 28th, the SEC agreed to review the previous disapproval of The NASDAQ Stock Market's proposed rule change to discount certain market data fees and increase certain liquidity provider credits for members that both (1) execute specified levels of transaction volume on NASDAQ as a liquidity provider, and (2) purchase specified levels of market data from NASDAQ. Statements in support or opposition to the proposed rule change should be submitted on or before April 18, 2012. SEC Release No. 34-66667. See also SEC Release No. 34-65362 (SEC order disapproving proposed rule change).

• Updated Guide.

On March 27th, the National Futures Association published an updated regulatory guide for foreign exchange transactions.

• Amendment Regarding Technical or System Errors is Proposed.

On March 26th, the SEC provided notice of NYSE Arca's filing of a proposed amendment to NYSE Arca Equities Rule 7.45 to add a new paragraph (d) that addresses the authority of the Exchange or Archipelago Securities LLC to cancel orders when a technical or systems issue occurs and to describe the operation of an error account for Arca Securities. Comments should be submitted on or before April 20, 2012. SEC Release No. 34-66656.

• When A Fake Isn't Counterfeit.

On March 28th, the Seventh Circuit held that a fake certificate of origin for a motor home used to secure a loan does not meet the definition of "counterfeit" for coverage under a financial institutions bond. It is undisputed that an original certificate for the motor home never existed. What was presented to the bank was a complete fabrication, not a "counterfeit" of an original. The Court therefore affirmed the trial court's order of summary judgment dismissing the lender's lawsuit against its insurer seeking recovery under the financial institutions bond. North Shore Bank, FSB v. Progressive Casualty Insurance Co.

• Rajat Gupta's Motion to Suppress Wiretaps is Denied.

On March 27th, the U.S. District Court denied Rajat Gupta's motion to suppress wiretap evidence in his insider trading prosecution. Adopting the reasoning of Judge Holwell in the insider trading prosecution of Raj Rajaratnam, which used the same wiretap evidence, the instant Court noted that wire fraud is an offense for which wiretapping is approved. Since the Government informed the Court of the crimes under investigation, the Government may use the wiretap evidence in the prosecution of crimes such as insider trading. And although the Government affidavit recklessly failed to advise the Court authorizing the wiretap of the SEC's involvement, the omission was harmless because a factually corrected affidavit would have still amply supported a finding of necessity. U.S. v. Gupta. The New York Times summarized the Court's other pre-trial rulings, including one that overruled SEC objections to questions about the deposition preparation received by Goldman Sachs CEO Lloyd Blankfein. The Court also required the Government to make available to Gupta SEC witness interview notes. Rulings.

• Section 16(b) Claims and the Statute of Limitations.

On March 26th, the Supreme Court held that the two-year time limit for bringing an action under Section 16(b) of the Securities Exchange Act, for prohibited short-swing profits, begins at the time the profit is realized. The statute of limitations is not tolled until the insider files the Section 16(a) disclosure statement. The Court was divided 4 to 4, and thus affirm without precedential effect, the Ninth Circuit's rejection of petitioners' contention that Section 16(b) establishes a period of repose that is not subject to tolling. Credit Suisse Securities (USA) LLC v. Simmonds.

• Investment Adviser Performance Compensation - Effective May 22, 2012.

The Securities and Exchange Commission ("SEC") is adopting amendments to the rule under the Investment Advisers Act of 1940 that permits investment advisers to charge performance based compensation to "qualified clients." The amendments revise the dollar amount thresholds of the rule's tests that are used to determine whether an individual or company is a qualified client. These rule amendments codify revisions that the SEC recently issued by order that adjust the dollar amount thresholds to account for the effects of inflation. 77 FR 10358.

• Edwards Discusses Executive Compensation at Dominican University.

Christine Edwards, a corporate partner in Winston & Strawn's Chicago office, will speak at the Edward A. Brennan Forum on Corporate Governance on April 18, 2012 in Chicago. This event is sponsored by the Brennan School of Business at Dominican University. Ms. Edwards will present "The $10 Million Question: A Discussion on Executive Compensation." Event.

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