• The JOBS Act.

On April 5th, Zack O'Malley Greenburg, the CEO of a crowdfunding website, blogged for Forbes regarding how the SEC should implement the crowdfunding provisions of the JOBS Act. Blog Post. See also CFO.com. The New York Times' DealBook discussed how the Act's provisions will affect a start-up's accounting and internal controls. Accounting Impact. Reuters noted that the JOBS Act's relaxed accounting requirements do not lesson a CEO's and CFO's obligations. Obligations. On April 3rd, Bloomberg summarized the JOBS Act's affect on the communications between research analysts and investment bankers. Communications.

• The Advice of Counsel Defense.

On April 5th, Bloomberg summarized recent arguments presented by the SEC in its enforcement action against Brian Stoker, a former executive of Citigroup. The individual lawsuit is related to the agency's action against Citigroup in which the SEC alleges the bank made misleading statements in its offering of a collateralized debt obligation. The parties' attempted settlement of that matter is currently on appeal. In the action against Stoker, the SEC has moved that Stoker be prevented from asserting the advice of counsel defense since Citigroup has refused to produce documents related to its lawyer's communications with Stoker. Advice of Counsel.

• Energy Ban.

On April 5th, Reuters reported that Senator Maria Cantwell is drafting legislation that would block exchange-traded funds and commodity index funds from the energy markets. Energy Ban.

• Reconciling Securitizations and the Volcker Rule.

On April 4th, the New York Times' DealBook asked whether firms will be able to offer new securitizations once the Volcker Rule is fully implemented. Citing recent offerings made by Credit Suisse, DealBook concludes that the Dodd-Frank Act's prohibition against proprietary trading will not spell the end to the securitization industry. Reconciliation.

• Why Securities Fraud Class Action Settlements Declined.

On April 2nd, the New York Times' DealBook analyzed Cornerstone Research's study that found that the number of court-approved class action securities fraud settlements dramatically fell during 2011. Analysis.

• Expanding the Foreclosure Settlement's Reach.

On April 2nd, the Washington Post reported that regulators are trying to apply the terms of February's $25 billion foreclosure settlement to other institutions. Regulators are considering which undertakings could be effectively applied to different firms. Applicability.

• Federal Reserve Board Amends Rules for the Administration of Reserve Requirements.

On April 5th, the Federal Reserve Board announced the approval of a final rule to simplify the administration of reserve requirements and reduce administrative and operational costs for depository institutions and Federal Reserve Banks. Federal Reserve Board Press Release (with links to final rule amendments).

• Federal Reserve Board Policy Statement on Rental of Residential Properties.

On April 5th, the Federal Reserve Board released a policy statement reiterating that statutes and Federal Reserve regulations permit rental of residential properties acquired in foreclosure as part of an orderly disposition strategy. The statement also outlines supervisory expectations for residential rental activities. Federal Reserve Board Press Release.

• OCC Issues Bulletin on Troubled Debt Restructurings.

On April 5th, the OCC issued a Bulletin to national banks and federal savings associations addressing the accounting and reporting requirements for troubled debt restructurings, especially related to loan renewals and extensions of substandard commercial loans.

• Federal Reserve Board Proposes Requirements for Determining What is "Predominantly Engaged in Financial Activities."

On April 2nd, the Federal Reserve Board published for comment a proposed amendment to the Board's Notice of Proposed Rulemaking ("NPR") issued February 11, 2011, to establish requirements for determining whether a company is "predominantly engaged in financial activities." Under Title 1 of the Dodd-Frank Act, a company generally can be designated for Board supervision by the Financial Stability Oversight Council only if 85 percent or more of the company's revenues or assets are related to activities that are financial in nature under the Bank Holding Company Act. Some commenters to the February 2011 NPR asked whether conditions imposed on the conduct of financial activities by the Bank Holding Company Act and the Board's regulations should be considered in defining financial activities for purposes of Title I. The Board therefore proposes to amend the NPR to clarify the activities that are financial for purposes of Title I. Comments should be submitted on or before May 25, 2012. Federal Reserve Board Press Release.

• Swaps Pushout Provision.

On March 30th, the Federal Reserve Board, FDIC, and OCC issued guidance clarifying that the effective date of Section 716, the so-called Swaps Pushout provision, of the Dodd-Frank Act is July 16, 2013. Section 716 generally prohibits certain types of Federal assistance, such as discount window lending and deposit insurance, for certain uses to a swaps entity with respect to its swap, security-based swap, or other activity. Joint Agency Press Release.

• FSOC Adopts New Rules.

On April 3rd, the Financial Stability Oversight Council approved two new final rules. The first, "Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies," implements Section 113 of the Dodd-Frank Act, which authorizes the Council to require a nonbank financial company to be supervised by the Federal Reserve Board and be subject to prudential standards if the Council determines that material financial distress at the company (or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the company) could pose a threat to U.S. financial stability. Under this authority, the Council can subject nonbank financial companies to a system of enhanced prudential standards, requiring them to operate in a manner that poses less risk to the financial system. The second new rule implements the Freedom of Information Act as it applies to the Council. Both rules are effective 30 days after publication in the Federal Register, which is expected this week. Treasury Department Press Release.

• Maximum Charge for Disclosure of FCRA Information to Consumers is Increased.

On April 3rd, the Consumer Financial Protection Bureau announced that the ceiling on allowable charges a consumer reporting agency may charge a consumer for making a disclosure to the consumer under Section 612(f) of the Fair Credit Reporting Act will increase from $11.00 to $11.50 effective April 3, 2012. 77 FR 20011.

• CFPB Bulletin on Compensating Loan Originators.

On April 2nd, the Consumer Financial Protection Bureau issued a Bulletin on the payment of compensation to loan originators under Regulation Z.

• Comments Requested on Nadex Application.

On April 5th, the CFTC requested comment on an application submitted by Nadex Clearing for registration as a derivatives clearing organization. Comments should be submitted on or before May 7, 2012. CFTC Press Release (with links to Nadex's application and supporting documents).

• Market Access.

On March 30th, Reuters reported the CFTC may publish a concept release on market access later this spring. Market Access.

• Exemptions for Security-Based Swaps Issued by Certain Clearing Agencies.

On March 30th, the SEC adopted exemptions under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Trust Indenture Act of 1939 for security-based swaps issued by certain clearing agencies satisfying certain conditions. The final rules exempt transactions by clearing agencies in these security-based swaps from all provisions of the Securities Act, other than the Section 17(a) anti-fraud provisions, as well as exempt these security-based swaps from Exchange Act registration requirements and from the provisions of the Trust Indenture Act, provided certain conditions are met. The new final rules are effective April 16, 2012. SEC Release No. 33-9308.

• SEC Reopens Comment Period on Target Date Fund Proposal.

On April 3rd, the SEC requested comment on the results of investor testing regarding target date retirement funds and reopened comment on its 2010 proposed rule aimed at improving the information provided to individuals investing in such funds. That proposal would require target date retirement funds to more prominently disclose the fund's asset allocation at the target date. In the SEC survey of investors, participants were asked questions after reviewing documents containing information about a hypothetical target date retirement fund. The documents included versions revised to reflect the changes proposed by the Commission. Investor Testing Report; SEC Press Release. Comments should be submitted on or before May 21, 2012. SEC Release No. 33-9309.

• GAO: Post-Judgment Interest Must be Paid to the Treasury.

On March 30th, the Government Accountability Office issued a decision concluding that post-judgment interest collected by the SEC on money judgments entered by federal district courts, when persons found to have violated federal securities laws have failed to pay monetary sanctions ordered by SEC, constitutes money for the government. Accordingly, the miscellaneous receipts statute requires that unless otherwise provided by law, such money must be deposited into the general fund of the U.S. Treasury. The SEC may distribute post-judgment interest to harmed investors as has been its custom.

• Report on SEC Implementation of Organization Reform Recommendations.

On March 30th the SEC published the second of four reports on its implementation of recommendations made by an independent consultant retained to assess the Commission's internal operations, structure, funding, and the agency's relationship with self-regulating organizations. Having completed the initial stages of review and analysis, the SEC anticipates that the level of activity related to the project will be reduced. Future phases of implementation are likely to require levels of funding that the agency will direct towards other priorities. Special Study. The study was required by Section 967 of the Dodd-Frank Act. The Washington Post noted that the SEC has so far spent a total of $13.4 million on the study and follow-up. The study has identified $13 million in savings. Cost-Benefit.

• SEC's Examination of SROs.

On April 4th Reuters reported the SEC, as part of its broader examination of high-frequency trading and market access, is investigating whether exchanges are adequately disclosing material changes to their business. Material Changes.

• SEC Designates Longer Period to Consider Trading Halt Proposal.

On March 29th, the SEC designated May 31, 2012 as the date by which it will decide whether to disapprove proposed rule changes submitted by the self-regulatory organizations relating to trading halts due to extraordinary market volatility. The SRO Proposals raise issues including the potential interaction between the mechanisms for moderating volatility in individual securities and those for moderating volatility market-wide. In addition, the Commission is considering commenters' concerns including whether only the Level III circuit breaker should halt trading after 3:25 p.m. and whether the market-wide circuit breakers should be triggered if a significant number of volatility moderators for individual securities are triggered. SEC Release No. 34-66680.

• CFP Bankruptcy.

On April 5th, the Certified Financial Planner Board of Standards announced the approval of new rules regarding the disclosure of information concerning a CFP who has declared bankruptcy. CFP Board Announcement.

• CME Group to Require Daily Reporting.

On April 3rd, Bloomberg reported that beginning May 1, 2012, CME Group will require brokers to report customer fund levels on a daily basis. The reports must be signed by the broker's CEO, CFO, or their designee. Daily Reports.

• FINRA Proposes New Expungement Procedure.

On April 5th, the Financial Industry Regulatory Authority ("FINRA") requested comment on proposed new rules that would permit persons who are the "subject of" allegations of sales practice violations made in arbitration claims, but who are not named as parties to the arbitration, to seek expungement relief. Comments should be submitted on or before May 21, 2012. FINRA Regulatory Notice 12-18.

• SEC Approves FINRA Telemarketing Rule.

On April 2nd, FINRA announced that the SEC has approved FINRA's proposed adoption of NASD Rule 2212 (Telemarketing) as FINRA Rule 3230 (Telemarketing) in the consolidated rulebook, taking into account certain requirements under NYSE Rule 440A (Telephone Solicitation) and its Interpretation. The new rule includes provisions that are substantially similar to Federal Trade Commission rules that prohibit deceptive and other abusive telemarketing acts or practices. FINRA Rule 3230 is effective June 29, 2012. FINRA Regulatory Notice 12-17.

• FINRA to Conduct Surveys before Updating Qualification Exams.

On April 2nd, FINRA announced that it will conduct surveys to seek input from currently registered individuals to help inform updates to the Series 27, 28 and 55 qualification examinations. Through these surveys FINRA intends to gather information from currently registered individuals regarding their roles, responsibilities and job functions, and to use the information to update the related qualification examinations. FINRA Information Memo.

• Rules Approved for Consolidated Rulebook.

On March 29th, the SEC granted accelerated approval to FINRA's proposed adoption of FINRA Rules 2210 (Communications with the Public), 2212 (Use of Investment Companies Rankings in Retail Communications), 2213 (Requirements for the Use of Bond Mutual Fund Volatility Ratings), 2214 (Requirements for the Use of Investment Analysis Tools), 2215 (Communications with the Public Regarding Security Futures), and 2216 (Communications with the Public About Collateralized Mortgage Obligations) in the Consolidated FINRA Rulebook. Comments should be submitted on or before April 25, 2012. SEC Release No. 34-66681.

• Cross-Margining Proposal Filed.

On March 29th, the SEC provided notice of the Fixed Income Clearing Corporation's filing of a proposal to expand the one-pot cross-margining program with New York Portfolio Clearing, LLC to certain "market professionals." Comments should be submitted on or before April 25, 2012. SEC Release No. 34-66679. On March 23rd, the CFTC requested comment on NYPC's parallel request. Comments to the CFTC on NYPC's request should be submitted on or before April 23, 2012. CFTC Press Release.

• Associated Person Requirements.

On April 4th, the SEC provided notice of NASDAQ OMX BX's filing of a proposed rule change regarding registration, qualification, and continuing education requirements for associated persons. The change is in response to the Division of Trading and Markets request to include additional types of individual associated persons subject to the requirements. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of April 9. SEC Release No. 34-66733.

• Proposed Enhancement of Margining Methodology Approved.

On April 4th, the SEC approved the National Securities Clearing Corporation's proposed enhancement of its margining methodology as it applies to municipal and corporate bonds. NSCC is amending Procedure XV of its Rules so that NSCC will apply a haircut-based margining methodology at a rate of no less than 2 percent as is currently permitted by Procedure XV to all municipal and corporate bonds processed through NSCC. The proposed rule change will make clear that to the extent NSCC deems appropriate NSCC may apply this haircut to any of the municipal and corporate bonds that it processes. SEC Release No. 34-66731.

• Mini-Options Contracts Proposed.

On April 3rd, the SEC provided notice of NYSE Arca's filing of a proposal to list and trade option contracts overlying 10 shares of a security ("Mini-Options Contracts") and implementing rule text necessary to distinguish Mini-Options Contracts from option contracts overlying 100 shares of a security. Comments should be submitted within 21 days after publication in the Federal Register, which is expected this week. SEC Release No. 34-66725.

• Circuit Breaker Levels.

On March 30th, NYSE Euronext published the Rule 80B circuit breaker levels for the second quarter of 2012. NYSE Euronext Information Memo 12-9.

• Amendments to Stock Loan Buy-In and Sell-Out Rules Proposed.

On April 2nd, the SEC provided notice of the Options Clearing Corporation's filing of proposed amendments relating to its stock loan buy-in and sell-out rules. The amendments would affect the buy-in and sell-out processes under the Market Loan Program, the Stock Loan/Hedge Program (to add a sell-out process), and the Stock Loan/Hedge Program (to add a cash settlement process). Comments should be submitted on or before April 27, 2012. SEC Release No. 34-66715.

• Securities Fraud Judgment Affirmed.

On April 4th, the Sixth Circuit affirmed a judgment in favor of an elderly man who invested over $14 million in oil and gas exploration wells. In doing so, it held that plaintiff's investments constituted fractional interests in oil and gas rights and were, therefore, securities. The Court also addressed when plaintiff was on inquiry notice of the fraud, holding that the limitations period did not begin until after plaintiff was on inquiry notice of defendants' scienter. It further held that defendants owed plaintiff a fiduciary duty entitling plaintiff to the presumption of reliance and that plaintiff did justifiably rely; a rescission theory of damages was appropriate; and tax benefits were not deducted from rescissory recovery. Nolfi v. Ohio Kentucky Oil Corp. See also companion opinion addressing state law issues.

• MERSCORP Lawsuit Remanded to State Court.

On April 2nd, a federal district court remanded a state probate judge's lawsuit against MERSCORP. Nancy O. Robertson, acting in her official capacity as probate judge of Barbour County, Alabama, and on behalf of all probate judges in the state, sued MERSCORP claiming that the defendants failed to record certain assignments of interests in mortgages. MERSCORP removed the matter but the federal district court remanded. MERSCORP has failed to satisfy its burden of demonstrating that the $75,000 amount-in-controversy requirement for diversity jurisdiction has been met in this case. Robertson v. MERSCORP, Inc.

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

The 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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