Financial Services Update______December 6, 2010
Volume 5, No. 44



IN THIS ISSUE

Insights from Winston & Strawn

In the News

Banking Agency Developments

Treasury Department Developments

Commodity Futures Trading Commission

Securities and Exchange Commission

Exchanges and Self-Regulatory Organizations

Judicial Opinions

Rules Effective Dates

Winston & Strawn Speaking Engagements and Publications


Insights from Winston & Strawn [Top]

As we approach year end, there clearly is no let-up in financial regulatory activity. This week's Update includes nearly two dozen rule proposals and guidance from the Labor Department, the Federal Reserve, the FDIC, the Office of Financial Research, the CFTC, the SEC, the Financial Industry Regulatory Authority and several other self-regulatory organizations. All of the financial regulators appear to be in high gear. However, with the end of the year just a few weeks away, and a new and quite different Congress poised to take office at the end of January, it raises the question of just how much will get done, and whether the Republican-led House of Representatives will put the brakes on any part of this activity. For example, while there has been little indication that the House will seek to rescind or repeal all or part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, there has been speculation since election day that budgets may be tightened, restricting the ability of the various agencies to carry out their mandated obligations. Indeed, this past week, right in the middle of the comment period for the SEC's new whistleblower proposal, the SEC said that, because of budget concerns, it is postponing the establishment of the separate office required by Dodd-Frank to administer and enforce the whistleblower requirements. Instead, the Division of Enforcement will take that role until the SEC has more information on the fiscal year 2011 budget. Work on several other Dodd-Frank-mandated offices is also being delayed. Announcement.
2011 could prove to be an interesting year if the cost of implementation becomes a greater concern for regulators developing new rules to satisfy statutory mandates, forcing them to more carefully consider the impact of proposals on their own resources as well as those of the persons and entities that they regulate.
In the News [Top]
  • Social Media Restrictions.
On December 3rd, Bloomberg reported on the financial services industry's use, or lack thereof, of social media, because of regulatory concerns and company policies. Social Media.
  • Consumer Financial Protection Bureau Enlists State Attorneys General.
On December 2nd, Bloomberg reported that Elizabeth Warren, who is setting up the Consumer Financial Protection Bureau, is coordinating the Bureau's work with the 50 state attorneys general. The Dodd-Frank Act, which established the new office, gives state attorneys general enforcement authority over the Bureau's regulations. Warren has also asked the attorneys general to develop new consumer policies for mortgages and credit cards. State Attorneys General. Reuters reported that Warren wants the Bureau to require greater simplicity in credit card agreements. Simplification.
  • House Judiciary Committee Holds Hearings on Home Foreclosures.
On December 2nd, the House Judiciary Committee held hearings on the mortgage foreclosure process. See Hearing Website (with links to prepared remarks). The Washington Post summarized certain witness remarks, including those of New York State Supreme Court Justice Dana Winslow, who commented on whether banks have standing to foreclose. Other witnesses noted that the Mortgage Electronic Registration System undermines state recording requirements. Testimony.
  • Basel Committee Agrees on Basel III Text.
On December 1st, the Basel Committee on Banking Supervision announced that members have agreed on the details of the Basel III rules text, which includes global regulatory standards on capital adequacy and liquidity. The liquidity coverage ratio and the net stable funding ratio will be subject to an observation period and will include a review clause to address any unintended consequences. The Committee expects to publish the Basel III rules text by the end of this year. Basel Committee Press Release.
  • Labor Department Proposes Target Date Fund Rules.
On November 30th, the Labor Department published proposed amendments affecting target date funds offered in 401(k) and other participant-directed plans. The proposed rules would amend both the "qualified default investment alternative" (or "QDIA") regulations, as well as the recently issued final regulations on participant disclosures. The regulations generally require expanded disclosure regarding target date funds, which are investment options in which the asset allocation changes gradually over time, generally becoming more conservative as retirement date nears. Among the proposed requirements are disclosures addressing asset allocation; how that allocation will change over time; the significance of the investment's "target" date and an explanation of the age group for whom the fund is designed; and a statement that the participant may lose money by investing in the target date investment option, including losses near and following retirement, and that there is no guarantee that the target date investment option will provide adequate retirement income. Comments should be submitted on or before January 14, 2011. Labor Department Press Release.
  • Insider Trading Investigation.
On November 25th, the Washington Post reported that the federal district court overseeing the criminal insider trading prosecution of Raj Rajaratnam, co-founder of the hedge fund Galleon Group, has approved prosecutors' use of evidence obtained through wiretaps. Wiretaps. On November 29th, the New York Times reported that evidence obtained from the Galleon Group wiretaps formed the basis for the November 24 arrest of Don Ching Trang Chu of the expert networking firm Primary Global, and for the FBI's search of Diamondback Capital Management LLC, Level Global Investors LP and Loch Capital Management on November 22. Expanded Investigation. On December 3rd, Bloomberg reported that the SEC is unlikely to change its rules for research analysts in response to the criminal insider trading investigations. The SEC's focus appears to be different and SEC spokesman John Nester, responding to a request for comment, noted that to be actionable, insider trading requires the violation of a duty. Duties.

Banking Agency Developments [Top]
  • Agencies Issue Final Appraisal and Evaluation Guidelines.
On December 2nd, the federal financial regulatory agencies issued final supervisory guidance on sound practices by financial institutions for real estate appraisals and evaluations. The Interagency Appraisal and Evaluation Guidelines explain the agencies' minimum regulatory standards for appraisals, incorporate the agencies' recent supervisory issuances on appraisal practices, address advancements in information technology used in collateral valuation practices, and clarify standards for the industry's appropriate use of analytical methods and technological tools in developing evaluations. Federal Reserve Board Press Release.
  • Federal Reserve Announces Interactive Graphics Feature of Data Download Program.
On December 2nd, the Federal Reserve Board announced the availability of a new feature of its Data Download Program that allows users to create custom charts. Federal Reserve Board Press Release.
  • Federal Reserve Board Publishes Credit Crisis Information.
On December 1st, the Federal Reserve Board posted detailed information on its website about the more than 21,000 individual credit and other transactions conducted to stabilize markets during the recent financial crisis. Federal Reserve Board Press Release. See also Bloomberg (Federal Reserve as the world's central bank); New York Times (breadth of the program). On December 3rd, Bloomberg summarized the negotiations and conferences that created some of the Federal Reserve Board's programs, noting the unintended consequences of the programs and the inherent conflicts of interest their creation spawned. Programs. The New York Times reported on the investors in one of the Federal Reserve Board's programs, the Term Asset-Backed Securities Loan Facility. Investors.
  • OCC 2011 Fee Structure.
On December 1st, the OCC announced its 2011 fee structure, which will be effective January 1, 2011. OCC Bulletin.
  • FDIC Chairman Discusses Qualifying Residential Mortgages.
On December 1st, FDIC Chairman Sheila Bair testified before the Senate Banking Committee. Bair discussed the FDIC's efforts to develop standards for risk retention across several asset classes, including requirements for low-risk "Qualifying Residential Mortgages" that will be exempt from risk retention. Bair Testimony.
  • FDIC Issues Guidance on Overdraft Payment Programs.
On November 24th, the FDIC issued guidance addressing the risks associated with overdraft payment programs. The guidance provides assistance to FDIC-supervised institutions in identifying, managing, and mitigating risks associated with overdraft payment programs, including risks that could result in serious financial harm to certain consumers. FDIC Press Release.
  • FDIC Releases Quarterly Banking Profile.
On November 23rd, the FDIC released its most recent Quarterly Banking Profile. While insured institutions' profits continue to improve, institutions are warned not to reduce reserves. FDIC Press Release.
Treasury Department Developments [Top]
  • Forex Swaps.
On December 2nd, Reuters reported that the Treasury Department will decide by July 2011 whether to exempt foreign exchange derivatives from central clearing regulations. Forex Swaps.
  • Treasury Designates Three Pakistani Terrorists.
On December 2nd, the Treasury Department designated two Pakistani terrorists: Lashkar-e Jhangvi ("LJ") senior leader Amanullah Afridi for acting for or on behalf of LJ, and LJ chief operational commander Mati ur-Rehman for acting for or on behalf of LJ and al-Qa'ida. The Treasury Department also designated a third individual, Abdul Rauf Azhar, a senior leader of Jaish-e Mohammed ("JEM"), for acting for or on behalf of JEM. The designations prohibit U.S. persons from engaging in any transactions with these individuals and freeze any assets they have under U.S. jurisdiction. Treasury Department Press Release.
  • Treasury Designates Four Individuals Responsible for Violence in the Democratic Republic of Congo.
On December 2nd, the Treasury Department designated Gaston Iyamuremye, Leodomir Mugaragu and Felicien Nsanzubukire, three individuals who are part of the leadership of the Democratic Forces for the Liberation of Rwanda, one of the most violent armed groups operating in the Democratic Republic of Congo ("DRC"). Also designated was Innocent Zimurinda, an officer in the Congolese Armed Forces, who is responsible for targeting children in connection with the ongoing civil conflict in the eastern part of the DRC. The designations prohibit U.S. persons from engaging in any transactions with these individuals and freeze any assets that they have under U.S. jurisdiction. Treasury Department Press Release.
  • Treasury Targets Corporate Structures of the Islamic Republic of Iran Shipping Lines and Iran's Bank Mellat.
On November 30th, the Treasury Department announced the designations of five corporate officers and 10 businesses affiliated with either the Islamic Republic of Iran Shipping Lines or Bank Mellat, two entities previously designated by Treasury for supporting Iran's weapons of mass destruction program and carrying military cargoes. The designations prohibit U.S. persons from engaging in any transactions with these entities and freeze any assets that the designees have under U.S. jurisdiction. Treasury Department Press Release.
  • Statement on Legal Entity Identification for Financial Contracts.
On November 24th, the Treasury Department's Office of Financial Research published for comment a statement of policy regarding its preference to adopt through rulemaking a universal standard for identifying parties to financial contracts that is established and implemented by private industry and other relevant stakeholders through a consensus process. The Office seeks comment on this statement of policy, including but not limited to the desired characteristics for a Legal Entity Identifier and the institutional arrangements for issuing and maintaining identifiers and associated reference data. Comments should be submitted on or before January 31, 2011. Statement on Legal Entity Identification for Financial Contracts.
  • Treasury Department Designates Members of Pakistan-Based Terrorist Organization.
On November 24th, the Treasury Department designated three senior members and financiers of Lashkar-e Tayyiba ("LET") as Specially Designated Global Terrorists. The designees are Hafiz Abdur Rauf, a member of LET's senior leadership and head of LET's Falah-i Insaniat Foundation; Mian Abdullah, the head of LET's Traders' Department; and Mohammad Naushad Alam Khan, a key financial facilitator for LET. U.S. persons are prohibited from engaging in any transactions with these individuals, and any assets the designees have under U.S. jurisdiction are frozen. Treasury Department Press Release.
  • Financial Stability Oversight Council Proposes Rule on Systemically Important Financial Market Utilities.
On November 23rd, the Financial Stability Oversight Council published for comment the criteria and analytical framework that it would apply in designating systemically important financial market utilities. Comments should be submitted within 30 days after publication in the Federal Register, which is expected during the week of December 6. Proposed Rule.
  • Financial Stability Oversight Council Timetable.
On November 23rd, Treasury Secretary Timothy Geithner outlined the Financial Stability Oversight Council's rulemaking timetable. In January, the Council will propose a rule governing the designation of non-bank financial institutions as systemically important. The Council will also be working on the mechanism for resolving failed financial firms and addressing mortgage disclosure and credit card issues. Geithner Remarks.
  • FinCEN Issues New Rule and Guidance on SAR Confidentiality.
On November 23rd, the Financial Crimes Enforcement Network released a final rule, entitled Confidentiality of Suspicious Activity Reports, as well as an advisory, two guidance documents, and a Notice of Availability of Guidance, which together clarify and strengthen the scope of Suspicious Activity Report confidentiality, and expand the ability of certain financial institutions to share SAR information with most affiliates. FinCEN Press Release (with links to documents). The OCC and OTS issued related rules and guidance. See OCC SAR Confidentiality Rule; OCC SAR Release Standards; OTS SAR Confidentiality Rule; OTS SAR Release Standards. The new rules and guidance are effective January 3, 2011.
Commodity Futures Trading Commission [Top]
Proposed Rules and Requests for Comment
  • Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy.
On December 3rd, the CFTC published for public comment proposed requirements for swap dealers and major swap participants with respect to the treatment of collateral posted by their counterparties to margin, guarantee, or secure uncleared swaps. The proposal also would ensure that, for purposes of subchapter IV of chapter 7 of the Bankruptcy Code, securities held in a portfolio margining account that is a futures account constitute "customer property" and owners of such account constitute "customers." Comments should be submitted on or before February 1, 2011. 75 FR 75432.
  • Protection of Cleared Swaps Customers Before and After Commodity Broker Bankruptcies.
On December 2nd, the CFTC published for public comment possible models for implementing new statutory provisions enacted by the Dodd-Frank Act concerning the protection of collateral posted by customers clearing swaps. Comments should be submitted on or before January 18, 2011. 75 FR 75162.
  • CFTC Votes to Propose New Rules.
On December 1st, the CFTC voted to propose for comment core principles and other requirements for designated contract markets; general regulations for derivatives clearing organizations; information management requirements for derivatives clearing organizations; reporting, recordkeeping, and daily trading records requirements for swap dealers and major swap participants; and further definitions of "swap dealer," "security-based swap dealer," "major swap participant," and "eligible contract participant." See Bloomberg; Reuters.
  • Registration of Swap Dealers and Participants.
On November 23rd, the CFTC published for comment proposed rules establishing the process for registering swap dealers and major swap participants. The proposed regulations also would require swaps entities to become members of the National Futures Association and to confirm that persons associated with them are not subject to a statutory disqualification under the Commodity Exchange Act. Comments should be submitted on or before January 24, 2011. 75 FR 71379.
  • Regulations Establishing and Governing the Duties of Swap Dealers and Participants.
On November 23rd, the CFTC published for comment proposed rules setting forth certain duties imposed upon swap dealers and major swap participants registered with the CFTC with regard to risk management procedures; monitoring of trading to prevent violations of applicable position limits; diligent supervision; business continuity and disaster recovery; disclosure and the ability of regulators to obtain general information; and antitrust considerations. Comments should be submitted on or before January 24, 2011. 75 FR 71397.
  • Conflicts of Interest Rules for Swap Dealers and Participants.
On November 23rd, the CFTC published for comment proposed rules establishing conflicts of interest requirements for swap dealers and major swap participants for the purpose of ensuring that such persons implement adequate policies and procedures in compliance with the Commodity Exchange Act. Comments should be submitted on or before January 24, 2011. 75 FR 71391.
  • Request for Comment on the Oversight of a Carbon Market.
On November 19th, the CFTC requested comment on topics and questions related to the Dodd-Frank Act mandated study concerning the oversight of a carbon market. Comments should be submitted on or before December 17, 2010. CFTC Press Release.
Other Developments
  • Open Meeting.
On December 2nd, the CFTC announced that it will hold a public meeting on December 9, 2010, to consider the issuance of proposed rules regarding swap execution facilities and an interim final rule for reporting certain post-enactment swap transactions. CFTC Press Release.
  • Disruptive Trading Practices.
On December 2nd, Reuters reported on the CFTC's hearings regarding the Dodd-Frank Act's requirement that certain trading practices be prohibited. Witnesses agreed that clarity is needed but warned against overly-restrictive rules. Disruptive Trading Practices.
  • Forged Comment Letters.
On December 1st, Bloomberg reported that the CFTC has received forged public comment letters in response to its proposed rules and is referring the matter to the Justice Department. Forgeries.

Securities and Exchange Commission [Top]
New Final Rules
  • Order Extending Temporary Conditional Exemption for NRSROs from Securities and Exchange Act Rule 17g-5(a)(3).
On November 23rd, the SEC extended to December 2, 2011, its conditional exemption providing that nationally recognized statistical rating organizations are not required to comply with Securities and Exchange Act Rule 17g-5(a)(3) with respect to credit ratings, where the issuer of the structured finance product is a non-U.S. person; and the NRSRO has a reasonable basis to conclude that the structured finance product will be offered and sold upon issuance, and that any arranger linked to the structured finance product will effect transactions of the structured finance product after issuance only in transactions outside the U.S. SEC Release No. 34-63363.
  • CDS Exemption Extended.
On November 22nd, the SEC extended until July 16, 2011, the expiration dates in the temporary rules providing exemptions under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Trust Indenture Act of 1939 for certain credit default swaps, in order to continue facilitating the operation of one or more central counterparties for those credit default swaps until the implementation of the clearing provisions of the Dodd-Frank Act. SEC Release No. 33-9158.
Regulatory Orders and Notices
  • Investment Adviser Registration Depository Filing Fees.
On December 2nd, the SEC advised that it is revising the Investment Adviser Registration Depository annual and initial filing fees that will be charged beginning January 1, 2011. Hearing requests on the revised fee should be filed on or before December 21, 2010. SEC Release No. IA-3119.
  • SIPC Proposes By-Law Change Regarding Minimum Assessments.
On November 30th, the SEC provided notice of the Securities Investor Protection Corporation's proposed bylaw change to the minimum assessment that it imposes on member firms from an amount not to exceed $150 to an amount not to exceed 0.02 percent of the gross revenues from the securities business of the SIPC member. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 6. SEC Release No. SIPA-169.
Proposed Rules
  • "Swap" Definitions.
On December 3rd, the SEC voted to propose jointly with the CFTC new rules defining "Swap Dealer," "Security-Based Swap Dealer," "Major Swap Participant," "Major Security-Based Swap Participant," and "Eligible Contract Participant." See Schapiro Open Meeting Remarks; Bloomberg.
  • Temporary Rule Regarding Principal Trades with Certain Advisory Clients.
On December 1st, the SEC published for comment a proposal amending Rule 206(3)-3T under the Investment Advisers Act of 1940, a temporary rule that establishes an alternative means for investment advisers who are registered with the SEC as broker-dealers to meet the requirements of Section 206(3) of the Investment Advisers Act when they act in a principal capacity in transactions with certain of their advisory clients. The amendment would extend the date on which Rule 206(3)-3T will sunset from December 31, 2010, to December 31, 2012. Comments should be submitted on or before December 20, 2010. SEC Release No. IA-3118.
  • SEC Proposes Swaps Rules.
On November 19th, the SEC published for comment proposed new rules and rule amendments governing the security-based swap data repository registration process, the duties of such repositories, and the core principles applicable to such repositories. SEC Press Release on Swap Repositories. See also Schapiro Remarks on Swap Repositories. Comments on the proposed swap data repository registration rules should be submitted within 45 days after publication in the Federal Register, which is expected during the week of December 6. The SEC also voted to propose Regulation SBSR to provide for the reporting of security-based swap information to registered security-based swap data repositories or the SEC, and the public dissemination of security-based swap transaction, volume, and pricing information. SEC Press Release on Regulation SBSR. See also Schapiro Remarks on Regulation SBSR; Aguilar Remarks. Comments on proposed Regulation SBSR should be submitted on or before January 18, 2011.
  • SEC Proposes Adviser Registration Rules and Amendments.
On November 19th, the SEC published for comment proposed new rules and rule amendments increasing the statutory threshold for registration by investment advisers with the SEC, requiring advisers to hedge funds and other private funds to register with the SEC, and addressing reporting by certain investment advisers that are exempt from registration. SEC Release No. IA-3110. The SEC also published rules and rule amendments implementing new exemptions from the registration requirements of the Investment Advisers Act of 1940 for advisers to venture capital funds and advisers with less than $150 million in private fund assets under management in the United States. These proposed rules also clarify the meaning of certain terms included in a new exemption for foreign private advisers. SEC Release No. IA-3111. Comments on each proposal should be submitted within 45 days after publication in the Federal Register, which is expected during the week of December 6. See also SEC Press Release and Fact Sheet.
Other Developments
  • Chief Accountant's Presentation at the PCAOB Forum on Auditing in the Small Business Environment.
On December 1st, the SEC posted the slide presentation of Wayne Carnall, Chief Accountant, Division of Corporation Finance, on the SEC staff's review of common financial reporting issues facing smaller issuers. Slide Presentation.
  • Temporary Circuit Breakers to be Extended.
On November 30th, Reuters reported that the SEC will extend temporary circuit breakers aimed at preventing another "flash crash," which are due to expire on December 20, 2010. The Commission's plans to implement limit up/limit down rules to replace the temporary circuit breakers have been delayed by the need to address issues mandated by the Dodd-Frank Act. Circuit Breakers.
  • Proxy Advisory Firms.
On November 30th, the New York Times summarized the comments submitted to the SEC concerning proxy advisory firms. Proxy Advisory Firms.
  • Regulation AB No-Action Position Extended.
On November 23rd, the Division of Corporation Finance extended indefinitely its July 22, 2010 no-action position regarding Regulation AB. The Division will not recommend enforcement action against an issuer of asset-backed securities that omits credit rating disclosure information. Regulation AB.
  • SEC Schedules Second Field Hearing on Municipal Securities Markets.
On November 23rd, the SEC announced that it will hold its second field hearing to examine the municipal securities markets at its Headquarters in Washington, D.C. on December 7, 2010. Topics will include market stability and liquidity, investor impact, and self-regulation. SEC Press Release.
Exchanges and Self-Regulatory Organizations [Top]
BATS Exchange
  • BATS Proposes Directed Order Program.
On December 1st, the SEC provided notice of BATS Exchange's proposal to establish a directed order program through which Options Members can direct an order to a particular BATS Options Market Maker for potential execution at a price improved over the existing National Best Bid or National Best Offer. The proposal would establish new Rule 21.1(d)(13) (Market Maker Price Improving Orders); establish new Rule 21.1(d)(14) (Directed Orders); and modify Rule 21.1(d)(6) (Price Improving Orders). Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 6. SEC Release No. 34-63403.
Financial Industry Regulatory Authority
  • FINRA Board of Governors Announces Rulemaking Items for Discussion at the December 2010 Meeting.
The FINRA Board of Governors has announced the rulemaking items that it will consider at its December 2010 meeting. After the December 8 meeting, FINRA will notify firms via email about the Board's actions on these items and anticipated next steps, if any. Meeting.
  • 2011 Holiday Trade Date, Settlement Date and Margin Extensions Schedule.
On December 2nd, the Financial Industry Regulatory Authority provided a schedule to assist member firms and to reduce the number of Federal Reserve Board Regulation T and SEC Regulation 15c3-3 extensions denied around holidays. FINRA Information Notice.
  • FINRA Extends Implementation of Asset Verification Rule.
On November 29th, the SEC granted immediate effectiveness to the Financial Industry Regulatory Authority's proposed 30 day extension of the implementation period for FINRA Rule 4160 (Verification of Assets). Rule 4160 provides that a member, when notified by FINRA, may not continue to custody or retain record ownership of assets, whether such assets are proprietary or customer assets, at a non-member financial institution, which, upon FINRA staff's request, fails promptly to provide FINRA with written verification of assets maintained by the member at such financial institution. Comments should be submitted on or before December 27, 2010. SEC Release No. 34-63383. On December 3rd, FINRA advised that Rule 4160 will become effective February 1, 2011. FINRA Regulatory Notice 10-61.
  • SEC Approves FINRA Rule on Allocation and Distribution of New Issues.
On November 29th, the Financial Industry Regulatory Authority announced that the SEC has approved new FINRA Rule 5131 (New Issue Allocations and Distributions), which prohibits certain abuses in the allocation and distribution of new issues. Among other things, the rule prohibits quid pro quo allocations and "spinning," and addresses the conduct of member firms (and associated persons) in the areas of book-building, new issue pricing, penalty bids, trading and waivers of lock-up agreements. The new rule is effective May 27, 2011. FINRA Regulatory Notice 10-60. See the Winston & Strawn Briefing "Update on New FINRA Rules and Rule Proposals for Public Offerings."
  • SEC Approves Rule Requiring Encryption of Information Sent Via Portable Device.
On November 29th, the Financial Industry Regulatory Authority announced that the SEC has approved a new rule requiring that information provided via portable media device be encrypted. The new rule is effective December 29, 2010. FINRA Regulatory Notice 10-59.
  • FINRA Proposes Rules for Inclusion in Consolidated Rulebook.
On November 24th, the SEC provided notice of the Financial Industry Regulatory Authority's proposal to adopt rules governing guarantees, carrying agreements, security counts and supervision of general ledger accounts in the Consolidated FINRA Rulebook. Comments should be submitted on or before December 22, 2010. SEC Release No. 34-63375.
Fixed Income Clearing Corporation
  • FICC Files Cross-Margining Proposal.
On November 23rd, the SEC provided notice of the Fixed Income Clearing Corporation's proposal to allow it to enter into a cross-margining arrangement with New York Portfolio Clearing, LLC, which has applied to be registered with the Commodity Futures Trading Commission as a derivatives clearing organization. The proposed rule change would permit FICC to offer cross-margining of certain positions cleared at its Government Securities Division and certain positions cleared at NYPC. Comments should be submitted on or before December 21, 2010. SEC Release No. 34-63361.
National Securities Clearing Corporation
  • NSCC Proposes Modification of Money Tolerance Comparison Provisions.
On December 1st, the SEC provided notice of the National Securities Clearing Corporation's proposed amendment to Procedure II ("Trade Comparison and Recording Service") of the NSCC Rules & Procedures, to modify the money tolerance comparison provisions for fixed income securities. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 6. SEC Release No. 34-63404.
  • NSCC Proposes Automated Service For Insurance And Retirement Products.
On November 23rd, the SEC provided notice of the National Securities Clearing Corporation's proposal to add a new automated service to process transfers, replacements, and exchanges of insurance and retirement products through NSCC's Insurance and Retirement Processing Service. Comments should be submitted on or before December 21, 2010. SEC Release No. 34-63368.
Judicial Opinions [Top]
  • Ninth Circuit Affirms Securities Fraud Related Money Laundering Conviction.
On December 3rd, the Ninth Circuit addressed whether the U.S. Supreme Court's decision in U.S. v. Santos, which discussed money laundering under 18 U.S.C. § 1956, applies to a money laundering case brought under Section 1957. Defendant appealed his securities fraud related money laundering conviction under Section 1957, arguing that the government failed to prove that his money laundering transactions involved the profits of criminal activities, as required by U.S. v. Santos. Although the Ninth Circuit held that Santos applies to money laundering transactions under 18 U.S.C. § 1957, it nevertheless affirmed the conviction because defendant's money laundering and fraud offenses did not merge. U.S. v. Bush.
  • Seventh Circuit Affirms Pro Rata Distribution of Receivership Assets.
On December 1st, the Seventh Circuit affirmed the approval of a receiver's plan to distribute the assets of a failed investment manager, finding that where a receivership trust lacks sufficient assets to fully repay investors and the investors' funds are commingled, a pro rata distribution plan is appropriate, and that the trial court properly rejected the objectors' arguments that their redemption requests made them creditors and not equity holders. SEC v. Wealth Management, LLC.
  • Ninth Circuit Affirms Dismissal of Sarbanes-Oxley Whistleblower Case.
On November 30th, the Ninth Circuit affirmed the Administrative Review Board's dismissal of a petitioner's Sarbanes-Oxley whistleblower claim as untimely. The claim accrued when petitioner was told of the adverse employment action and no later than her last day of work, not when petitioner suspected a legal wrong. The limitations period was not subject to equitable tolling because tolling ceased when petitioner retained counsel and because petitioner had access to the underlying facts prior to her last day of work. Coppinger-Martin v. Solis.
  • SLUSA Discovery Stay Does Not Bar Public Record Requests.
On November 29th, the Seventh Circuit held that a federal district court may not invoke the Securities Litigation Uniform Standards Act's discovery stay provision to enjoin a private securities plaintiff from gaining access to records that a state's public-records law entitles members of the public to see and copy at their own expense. American Bank v. City of Menasha.
  • "Points" Not Subject to RESPA.
On November 23rd, the Eleventh Circuit held that the payment of "points'' to provide a specific interest rate for a home mortgage is not the rendering of a real estate service within the meaning of the Real Estate Settlement Procedures Act. Wooten v. Quicken Loans, Inc.
  • Securitization Trust Prohibited from Enforcing Mortgage Note.
On November 17th, a federal bankruptcy court denied a proof of claim against a bankrupt homeowner brought by the trustee for the securitization pool that owned the mortgage note. Under New Jersey UCC law, the mortgage note was not enforceable by the trustee because the note had never been transferred to it. Although Countrywide Inc. originated the loan and still possessed the note, the trustee never possessed the note and the note was never properly endorsed to the trustee. Kemp v. Countrywide Home Loans, Inc. See also Bloomberg.
Rules Effective Dates [Top]
  • Risk Management Controls for Brokers and Dealers with Market Access - Effective January 14, 2011.
The Securities and Exchange Commission is adopting new Rule 15c3-5 under the Securities Exchange Act of 1934. Rule 15c3-5 will require brokers and dealers with access to trading securities directly on an exchange or alternative trading system ("ATS"), including those providing sponsored or direct market access to customers or other persons, and broker-dealer operators of an ATS that provide access to trading securities directly on their ATS to a person other than a broker or dealer, to establish, document, and maintain a system of risk management controls and supervisory procedures that, among other things, are reasonably designed to (1) systematically limit the financial exposure of the broker or dealer that could arise as a result of market access, and (2) ensure compliance with all regulatory requirements that are applicable in connection with market access. 75 FR 69791.
Winston & Strawn Speaking Engagements and Publications [Top]
  • SEC Proposed Rule 21F-13: A Hidden Whistleblower Tax?
On November 3rd, the Securities and Exchange Commission published proposed Regulation 21F, establishing a program designed to reward individuals who provide the SEC with information leading to successful enforcement actions. Briefing.
  • Securities and Exchange Commission Issues Rule Proposals to Implement Dodd-Frank Act for Investment Advisers, Advisers to Private Funds, Venture Capital Funds, and Foreign Private Advisers.
On Nov. 19, 2010, the Securities and Exchange Commission issued two separate releases under the Investment Advisers Act of 1940 to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Briefing.
  • Winston & Strawn Sponsors Northwestern's 2011 Kellogg Private Equity and Venture Capital Conference.
Winston & Strawn will sponsor Northwestern's 2011 Kellogg Private Equity and Venture Capital Conference, to be held February 9 in Chicago. Event.

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