• "Money Never Sleeps."

On September 24th, the Los Angeles Times reported on the cooperation director Oliver Stone received from financial executives and traders as he filmed the movie "Wall Street: Money Never Sleeps." Bonfire of the Vanities.

• RMBS Investor Clearinghouse.

On September 23rd, Bloomberg reported on the RMBS Investor Clearinghouse which matches holders of private-label residential mortgage-backed securities so that collective action can be taken. RMBS Investor Clearinghouse.

• Ally Financial Suspends Foreclosures.

On September 22nd, the Washington Post reported that Ally Financial has halted home foreclosures in 23 states because of its failure to comply with state laws requiring the verification and notarization of foreclosure documents. One person at Ally was responsible for signing the documents, which totaled 10,000 a month. He testified at a recent deposition that he neither fully read the documents nor signed them in the presence of a notary. Foreclosures. On September 23rd, Bloomberg reported that Ally's GMAC unit was sanctioned in 2006 for substantially similar behavior and had told the court that it was correcting the problem. The GMAC official involved in the 2006 matter supervised the witness in the current case. Earlier Sanctions. Separately, Bloomberg reported state attorneys general are investigating. Investigation.

• Bill Repealing SEC's FOIA Exemptions Passes.

On September 22nd, the Senate passed S. 3717, a bill repealing the SEC's FOIA exemptions, and on September 23rd, the House did likewise.

• SEC Inspector General Testifies before the Senate Banking Committee.

On September 22nd, the Washington Post reported the testimony of SEC Inspector General David Kotz before the Senate Banking Committee concerning his investigation into the SEC's examination of Robert Allen Stanford. Kotz said that the then head of enforcement of the Ft. Worth office who allegedly suppressed the examination, later represented Stanford. Kotz has referred the matter to the Justice Department. Inspector General.

• Fraud Detection.

On September 21st, Bloomberg reported that the head of the SEC's New York regional office, George Canellos, believes that the Dodd-Frank Act's provisions regarding credit default swaps will allow the agency to detect frauds more easily. Transparency.

• Sixth Amendment vs. the "Reporter's Privilege."

On September 20th, Bloomberg reported that the Second Circuit heard oral arguments in the criminal stock option backdating case of former Monster Worldwide Inc. COO James Treacy. Among other things, Treacy contends that his Sixth Amendment right to confront a witness was violated when the district court limited the questioning of Charles Forelle, a Wall Street Journal reporter who asserted his "reporter's privilege." Oral Argument.

• Consumer Financial Protection Bureau.

On September 20th, the Bureau of Consumer Financial Protection announced that July 21st, 2011 will be the date on which certain authorities will transfer from other agencies to the CFPB and the CFPB will be able to exercise certain additional, new authorities under the Consumer Financial Protection Act and other laws. 75 FR 57252. On September 22nd, Reuters reported that Treasury Secretary Timothy Geithner has said that the CFPB will not have new consumer rules prior to July 2011. Geithner Comments.

• Mortgage Cramdowns.

On September 19th, the Los Angeles Times reported on an August 3rd, 2010 article by two economists from the Federal Reserve Bank of Cleveland. Entitled "Stripdowns and Bankruptcy: Lessons from Agriculture Bankruptcy Reform," the article draws parallels between today's underwater home mortgage problem with the 1980's farm foreclosure crisis. The authors conclude that the stripdown authority created by Chapter 12 of the Bankruptcy Code did not have the dire economic affect upon banks and lending as many had predicted. They suggest that that experience may be used in the debate over whether to grant bankruptcy courts similar authority in the home mortgage context. Los Angeles Times.

• Refinancing Underwater Mortgages.

On September 18th, the New York Times published an op-ed article by Glenn Hubbard, the chairman of the Council of Economic Advisers under President George W. Bush entitled "How Underwater Mortgages Can Float the Economy." A new program coordinated by the federal home financing agencies can help owners of homes worth less than the outstanding mortgages refinance the mortgages.

• Mortgage Metrics Report.

On September 24th, the OCC and OTS released their mortgage metrics report for the second quarter of 2010. Joint Press Release.

• Federal Reserve Board Publishes Interim Rule Revising Disclosure Requirements for Closed-End Mortgages.

On September 24th, the Federal Reserve Board published in the Federal Register interim rules that were originally announced on August 16th, 2010. The interim rules revise the disclosure requirements for closed-end mortgage loans under Regulation Z (Truth in Lending). The interim rule implements provisions of the Mortgage Disclosure Improvement Act that require lenders to disclose how borrowers' regular mortgage payments can change over time. The interim rule is effective October 25th, 2010. Compliance is optional until January 30th, 2011. The rule's requirements are mandatory for transactions for which an application for credit is received by the creditor on or after that date. Comments should be submitted on or before November 23rd, 2010. See also Federal Reserve Board Press Release.

• Federal Reserve Board Publishes Proposed Rules Regarding Jumbo Mortgage Loan Escrow Requirements.

On September 24th, the Federal Reserve Board published in the Federal Register proposed rules that were originally announced on August 16th, 2010. The proposed rules would revise the escrow account requirements for higher-priced, first-lien "jumbo" mortgage loans. Comments should be submitted on or before October 25th, 2010. See also Federal Reserve Board Press Release.

• Federal Reserve Board Publishes Proposed Rules on Consumer Protections and Disclosures for Home Mortgage Transactions.

On September 24th, the Federal Reserve Board published in the Federal Register proposed rules that were originally announced on August 16th, 2010. The proposed rules would revise the rules for the consumer's right to rescind certain open-end and closed-end loan secured by the consumer's principal dwelling. Comments should be submitted on or before December 23rd, 2010. See also Federal Reserve Board Press Release.

• National Credit Union Administration Issues New Rules on Short-Term Small Amount Loans.

On September 24th, the National Credit Union Administration amended its general lending rule to enable Federal credit unions to offer short-term, small amount loans as an alternative to payday loans. The rule is effective October 25th, 2010. 75 FR 58285.

• Resolution Authority.

On September 21st, Reuters reported that on September 27th, 2010, the FDIC will vote on a rule implementing its newly authorized resolution authority under the Dodd-Frank Act. Agenda.

• FFIEC Publishes HMDA Data.

On September 20th, the Federal Financial Institutions Examination Council made available data on mortgage lending transactions at 8,124 U.S. financial institutions covered by the Home Mortgage Disclosure Act. The HMDA data made available cover 2009 lending activity applications, originations, purchases of loans, denials, and other actions such as incomplete or withdrawn applications. FFIEC Press Release.

• OCC Issues Bulletin on "Self-Deposits."

On September 20th, the OCC issued guidance to national banks on "self-deposits," funds for which a national bank is a fiduciary and placed on deposit in the bank or with a bank affiliate. Self-deposits include fiduciary funds held in interest-bearing accounts, such as Money Market Deposit Accounts or certificates of deposit; short-term investment pools consisting of own-bank deposits; and omnibus cash or other processing accounts. The guidance clarifies the agency's overall expectations for self-deposits and highlights the associated risks and the need for national banks and trust companies to ensure that bank self-deposit activities meet fiduciary standards. OCC Bulletin 2010-37.

• Financial Stability Oversight Council to Meet.

On September 23rd, the Treasury Department announced that the Financial Stability Oversight Council will hold its first meeting on October 1st, 2010. Treasury Department Press Release.

• Open Meeting on Rulemakings Under the Dodd-Frank Act.

The CFTC will hold an open meeting on October 1st, 2010, to consider rulemakings under the Dodd-Frank Act. The CFTC is scheduled to consider an interim final rule relating to the time frame for reporting pre-enactment unexpired swaps to a swap data repository or to the CFTC; proposed rules that would prescribe certain risk management standards for those derivatives clearing organizations designated as systemically important by the Financial Stability Oversight Council and standards requiring 60 days advance notice of changes in certain systemically important derivatives clearing organization ("SIDCO") rules; and proposed rules specifying requirements for derivatives clearing organizations, designated contract markets, and swap execution facilities on governance arrangements and mitigation of conflicts of interest. CFTC Release No. PR5901-10.

• CFTC's Technology Advisory Committee to Meet.

The CFTC's Technology Advisory Committee will meet on October 12th, 2010. The Committee's agenda includes a CFTC staff briefing on disruptive trading practices and new anti-manipulation rulemaking; best practices for high frequency trading, algorithmic trading and direct market access; swap execution facilities; and swap data repositories. Written statements in connection with the meeting should be submitted on or before October 11th, 2010. Technology Advisory Committee Meeting.

• CFTC Permits the Transfer of MGEX's Contract Market Designation and Derivatives Clearing Organization Registration.

On September 16th, the CFTC approved and issued orders permitting the transfer of the Minneapolis Grain Exchange's (i) Contract Market Designation; (ii) Derivatives Clearing Organization Registration; (iii) listed contracts; and (iv) positions comprising the open interest in those contracts to a newly-formed Delaware corporation, Minneapolis Grain Exchange, Inc. The Commission also approved proposed changes to the MGEX's bylaws and the addition of the new corporation's Certificate of Incorporation to the exchange's rulebook. All permitted transfers will become effective upon execution of the merger. CFTC Release No. PR5899-10.

• Short-Term Borrowing Disclosure.

On September 17th, the SEC proposed for comment new rules that would require companies to disclose their short-term borrowing arrangements. The proposed rules are intended to assist in understanding whether the amounts of short-term borrowing a company reports at the end of a reporting period is consistent with amounts of outstanding short-term borrowing throughout that reporting period. The additional short-term borrowing disclosure information would be presented in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of a company's quarterly and annual reports. In a companion interpretive release the SEC provided guidance intended to improve overall discussion of liquidity and capital resources in MD&A in order to facilitate understanding by investors of the liquidity and funding risks facing the registrant. The interpretive release is effective immediately. Comments on the proposed rules should be submitted within 60 days after publication in the Federal Register, which is expected during the week of September 27th. SEC Press Release (with fact sheet). See also CFO.com (discussing the Commissioners' unanimous vote).

• Enforcement Director Testifies before the Senate Judiciary Committee.

On September 22nd, Robert Khuzami, SEC Enforcement Director, testified about the SEC's enforcement efforts, including the activities of the Division's new specialized units. Khuzami Testimony.

• SEC Chairman Addresses the Security Traders Association.

On September 22nd, SEC Chairman Mary L. Schapiro discussed market structure issues including limit-up/limit-down style trading parameters under which trades would have to be executed within a range tied to the national best bid and offer; trading obligations; high-frequency trading; algorithmic trading; and swap execution facilities. Schapiro Remarks.

• Rulemaking Schedule.

The SEC has posted a schedule for writing the rules that will implement the Dodd-Frank Act. Schedule.

• "Flash Crash" Investigator.

On September 20th, the New York Times profiled Gregg E. Berman, Senior Policy Advisor in the SEC's Division of Risk, Strategy, and Financial Innovation. Berman is leading the SEC's investigation into the May 6th "flash crash" which will be released in two weeks. Profile.

• Exchanges Propose New Market Maker Rules.

On September 17th, Reuters reported stock exchanges have submitted to the SEC proposed rules that would prohibit stub quotes and require market makers to quote within a range from the best bid or offer price for stocks subject to the new circuit breaker rule. Market Makers. Comments on the Exchanges' individually submitted proposals should be submitted on or before October 15th, 2010. See BATS Exchange; NYSE Arca; NYSE Amex; NYSE; Chicago Stock Exchange; NASDAQ Stock Market; Chicago Board Options Exchange; National Stock Exchange; Financial Industry Regulatory Authority; NASDAQ OMX BX.

• Reporting Criterion for FOCUS Reports.

On September 22nd, the Financial Industry Regulatory Authority issued a regulatory notice on its new alert-reporting criterion for leverage in FOCUS Reports. FINRA Regulatory Notice 10-44.

• Regulatory Notice on Circuit Breaker Pilot and Clearly Erroneous Rule is Issued.

On September 22nd, the Financial Industry Regulatory Authority issued a regulatory notice on the expansion of its stock circuit breaker pilot program and on the refinement of its clearly erroneous transaction rules. FINRA Regulatory Notice 10-43.

• SEC Approves Amendments Establishing Regulation NMS-Principled Rules in Markets for OTC Equity Securities.

On September 20th, the Financial Industry Regulatory Authority announced that on February 11th, 2011, and May 9th, 2011, new FINRA rules that extend certain Regulation NMS protections to quoting and trading of over-the-counter Equity Securities will go into effect. These new rules: (i) set forth the permissible pricing increments for the display of quotations and acceptance of orders; (ii) require firms to avoid locking and crossing quotations within an inter-dealer quotation system; (iii) establish a cap on access fees imposed against a firm's published quotation; and (iv) require an OTC Market Maker, subject to certain exceptions, to display the full size of customer limit orders that improve the price of the marker maker's displayed quotation or that represent more than a de minimis change in the size of the market maker's quote if at the best bid or offer. FINRA Regulatory Notice 10-42.

• Due Diligence When Selling Municipal Securities in the Secondary Market.

On September 20th, the Financial Industry Regulatory Authority reminded members that they must fully understand the municipal securities they sell in order to meet their disclosure, suitability and pricing obligations under the rules of the Municipal Securities Rulemaking Board and federal securities laws. These obligations are not limited to firms involved in primary offerings. Dealers must also obtain, analyze and disclose all material facts about secondary market transactions that are known to the dealer, or that are reasonably accessible to the market through established industry sources. FINRA Regulatory Notice 10-41. See also FINRA Press Release.

• Price Validation and Price-Override Protocol.

On September 17th, the Financial Industry Regulatory Authority issued a notice explaining the price validation protocol of the FINRA trade reporting facilities and setting forth new guidance on the use of the price-override indicator in trade reports. Firms are required to make systems changes necessary to report in accordance with this guidance no later than November 16th, 2010. FINRA Trade Reporting Notice.

• FINRA Proposes Amendments to Rules Regarding Arbitration Referrals.

On September 17th, the SEC provided notice of the Financial Industry Regulatory Authority's proposal to broaden arbitrators' authority to make referrals during an arbitration proceeding, and to create a new rule to address the assessment of hearing session fees, costs, and expenses if an arbitrator makes a referral during a case that results in panel withdrawal. Comments should be submitted on or before October 14th, 2010. SEC Release No. 34-62930.

• FINRA Proposes Removal of TAF Exemption for Certain Exchange-Listed Options.

On September 17th, the SEC provided notice of the Financial Industry Regulatory Authority's proposal to amend Section 1(b) of Schedule A to the FINRA By-Laws to remove the exemption from the trading activity fee for transactions in exchange-listed options effected by a member when FINRA is not the designated options examining authority for that member. Comments should be submitted on or before October 14th, 2010. SEC Release No. 34-62927.

• NYSE Releases Corporate Governance Report.

On September 23rd, NYSE Euronext released the final report of the NYSE - sponsored Commission on Corporate Governance. NYSE Press Release.

• NYSE Proposes Amendment to Execution Algorithm for NYBX Orders.

On September 20th, the SEC provided notice of the New York Stock Exchange's proposal to amend Exchange Rule 1600 (New York Block Exchange) to provide for simultaneous routing, rather than the facility's current sequential routing, of appropriate volume from an NYBX order to attempt to execute simultaneously against all available contra side liquidity within the limit price of the order that is revealed on the initial market evaluation, whether that liquidity (i) is in the NYSE Display Book ("DBK"), displayed and undisplayed, (ii) is in the Facility, (iii) consists of top-of-book contra-side quotations displayed on other automated trading centers that must be routed to in order to avoid potential trade-throughs in compliance with Regulation NMS, or (iv) consists of top-of-book contra-side quotations displayed on other automated trading centers where no potential trade through is involved and Regulation NMS does not require routing. There will no longer be an initial routing of the full amount of the order (less any shares routed to other automated trading centers to comply with Regulation NMS) to the DBK in the hope that there will be some additional volume executed, over and above the displayed and undisplayed contra side liquidity in the DBK, against available contra side interest, if any, in the Capital Commitment Schedule of the Designated Market Maker provided for in NYSE Rule 1000(d)(i). Comments should be submitted on or before October 15th, 2010. SEC Release No. 34-62955.

• SEC Approves Amendment Regarding the Provision of Order Imbalance Information.

On September 15th, the SEC approved the New York Stock Exchange's and NYSE Amex's proposal amending Rule 123C to allow exchange systems to provide order imbalance information with respect to Market At-The-Close and Marketable Limit At-The-Close interest to Floor brokers beginning two hours and until fifteen minutes prior to the scheduled close of trading on every trading day. SEC Release No. 34-62923.

• Insurance Coverage.

On September 23rd, the Eleventh Circuit addressed the scope of an insurance policy. Plaintiff sold interests in real estate developments to participating banks under a loan participation sale and servicing agreement. After the borrower defaulted, plaintiff paid the participating banks the difference between the foreclosure price and their participation amount. It then sought coverage from its liability insurer. The Eleventh Circuit held that the payments for which the plaintiff seeks indemnification are monies due as the result of a loan and are excepted from the definition of loss. Southwest Georgia Financial Corp. v. Colonial American Casualty and Surety Co. (Unpublished).

• Floating Interest Rate Reaching over 50% is Enforceable.

On September 23rd, the Second Circuit held that because the interest rate provisions in the floating rate notes were not damages for a breach, they are not liquidated damages subject to review. The Court certified to the New York Court of Appeals questions concerning statutory interest. NML Capital Ltd. v. Argentina.

• Auditor Cannot Compel Arbitration.

On September 22nd, the Eleventh Circuit affirmed the trial court's denial of an auditor's motion to compel arbitration. Plaintiff, a third party who intended to rely upon the audit, sued the auditor for negligence, among other things. Because the arbitration provision in the auditor's engagement letter with its client was party specific, the court held that the auditor could not compel arbitration with the plaintiff. Corporate America Credit Union v. Herbst.

• Court Affirms Dismissal of Securities Fraud Claims against Issuer's Auditor.

On September 22nd, the Sixth Circuit affirmed the dismissal of a securities fraud action for failing to adequately plead scienter. Plaintiffs alleged that the defendant-auditor knowingly or recklessly ignored the issuer's financial misstatements in order to increase its audit fees. The Court held that conclusory allegations about what defendant must or should have known do not amount to specific allegations showing material misstatements or omissions committed with recklessness. La. School Employees' Ret. Sys. v. Ernst & Young LLP.

• Court Vacates Class Certification in Fraudulent Home Equity Case.

On September 22nd, the Third Circuit remanded for the second time a trial court's class certification in a case alleging a fraudulent home equity lending scheme. The trial court applied the wrong standard to determine that the named plaintiffs and class counsel were adequate representatives. The Third Circuit stated that on remand, the trial court should consider whether a subclass with timely RESPA and/or TILA/HOEPA claims should be created; and whether class counsel are adequate in light of counsel's reasons for not bringing TILA/HOEPA claims. In re Community Bank of Northern Virginia.

• Money Transmitting Businesses.

On September 22nd, the Second Circuit affirmed defendant's conviction for operating an unlicensed money transmitting business. 18 U.S.C. Sec. 1960(b)(1)(A) does not require a showing that the unlicensed money transmitting business was a "domestic financial institution" and the evidence supported finding that defendant failed to comply with state licensing requirements. U.S. v. Mazza-Alaluff.

• Court Reinstates Insider Trading Case against Mark Cuban.

On September 21st, the Fifth Circuit vacated the dismissal of the SEC's insider trading case against Mark Cuban, owner of the Dallas Mavericks. The SEC plausibly alleged the existence of an understanding between Cuban and the CEO of a company in which Cuban invested which provided that Cuban would not trade in the company's stock and would keep the company's PIPE offering confidential. SEC v. Cuban. On September 22nd, the Federal District Court for the District of Columbia partially granted Cuban's motion for summary judgment on his claim the SEC failed to adequately search for and produce documents in accordance with FOIA and the Privacy Act. Cuban v. SEC.

• Summary Judgment Entered Against SEC in Insider Trading Case.

On September 20th, the district court entered summary judgment in favor of defendants on SEC's insider trading claims under both the classical and misappropriation theories of insider trading. Because the SEC failed to show that a fiduciary duty or confidentiality agreement existed between a potential lender and the issuer, defendant, an employee of the lender, could not have breached a fiduciary duty owed to the issuer as a temporary insider by allegedly passing on insider information. The SEC also failed to show the scienter required under the misappropriation theory. SEC v. Obus.

• Court Vacates Order Remanding Public Nuisance Case Against Bank.

On September 20th, the Sixth Circuit vacated a district court's order remanding to state court a public interest group's public nuisance suit against a bank, as owner of vacant houses. The trial court undervalued the federal interests and overvalued state interests. The nuisance claim is not a difficult question of state law and federal adjudication will not threaten state policy. The state interests are therefore outweighed by the federal interest in affording a neutral forum. Cleveland Housing Renewal Project v. Deutsche Bank Trust Co.

• SEC Designates Bursa Malaysia's Securities Markets as Designated Offshore Markets Under Regulation S.

On September 10th, 2010 the Securities and Exchange Commission's Office of International Corporate Finance published its approval of Bursa Malaysia Securities Berhad and, for the limited purpose of trading certain "Shelf-Listed Bonds," the electronic trading platform operated by Bursa Malaysia Bonds Sdn Bhd., as "designated offshore securities markets" within the meaning of Rule 902(b) of Regulation S under the Securities Act of 1933, as amended. Briefing.

• Basel III Bank Capital Standards.

Amid considerable international publicity, the Basel Committee on Banking Supervision's oversight body, the Group of Governors and Heads of Supervision, on September 12th, 2010, announced a strengthening of existing bank capital requirements and also endorsed a proposal issued last July for an additional countercyclical capital buffer. Briefing.

• Community Bank Capital and Congress' Antipathy Toward Credit Ratings.

Since 1985, bank regulatory rules have appraised risk using credit ratings, but the financial crisis, with its attendant collapse of values of highly rated securities, have caused some to question the reliability of such ratings and concerns that banks have relied too heavily on such ratings has grown. This growing antipathy toward credit ratings is reflected in the work of the Basel Committee and in the Dodd-Frank Act. Briefing.

• Understanding the New UK Bribery Act: GC of the Serious Fraud Office, Vivian Robinson, Speaks and Takes Questions About the New Law.

Winston & Strawn will present an eLunch titled "Understanding the New UK Bribery Act: GC of the Serious Fraud Office, Vivian Robinson, Speaks and Takes Questions About the New Law" on Thursday, September 30th. Event.

• Winston & Strawn Sponsors TMA's Annual Convention.

Winston & Strawn is proud to sponsor the TMA Annual Convention to be held October 6th-8th, 2010, at the JW Marriott in Orlando, Florida. TMA is a premier professional organization dedicated to corporate renewal and turnaround management. This convention is for professionals who share a common interest in strengthening the economy through the restoration of corporate value, including turnaround practitioners, appraisers, attorneys, investment bankers, equity investors, liquidators, venture capitalists, as well as, workout specialists and outsourcing professionals. Event.

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