• Joint CFTC-SEC Committee to Meet.

The Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues will hold a public meeting on February 18, 2011 to discuss the market events of May 6, 2010. SEC Release No. 34-63798.

• ICE to Impose Position Limits in Cotton.

On February 3rd, the Los Angeles Times reported that the IntercontinentalExchange will impose position limits in cotton futures. Position Limits.

• House Financial Services Committee's Priorities.

On February 2nd, Reuters reported that the House Financial Services Committee intends to review the Dodd-Frank Act's prohibition against proprietary trading, the Financial Stability Oversight Council, the SEC's budget, and credit rating agencies. Priorities.

• FCIC Report Raises Questions.

On February 2nd, the New York Times reported that the documents related to collateralized debt obligations released by the Financial Crisis Inquiry Commission raise more questions than they answer. CDO Questions.

• Managed Funds Association Seeks Guidance on Expert Networks.

On January 31st, the New York Times reported that the Managed Funds Association has contacted SEC staff seeking guidance on permissible contacts with expert networks. Guidance.

• Agencies Propose Changes in Reporting Requirements for OTS-Regulated Institutions.

On February 3rd, the federal bank and thrift regulatory agencies announced proposed changes to reporting requirements for savings associations and savings and loan holding companies regulated by the Office of Thrift Supervision. Comments should be submitted within 60 days after publication in the Federal Register, which is expected during the week of February 7. Joint Press Release (with links to proposal texts).

• Federal Reserve Bank of New York Releases New Reverse Repo Eligibility Criteria.

On February 1st, the Federal Reserve Bank of New York released new criteria for money market fund participation in reverse repurchase transactions. The net asset requirement has been reduced to $5 billion and the minimum bid size has been reduced to $500 million. RRP Eligibility Criteria.

• Federal Reserve Will Not Finalize Three TILA Rules.

On February 1st, the Federal Reserve Board announced that it does not expect to finalize three pending rulemakings under Regulation Z, which implements the Truth in Lending Act (TILA), prior to the transfer of authority for such rulemakings to the Consumer Financial Protection Bureau. Two of the proposals, issued in August 2009, would have reformed the consumer disclosures under TILA for closed-end mortgage loans and home equity lines of credit. The third proposal, issued in September 2010 included changes to the disclosures consumers receive to explain their right to rescind certain loans and would have clarified the responsibilities of the creditor if a consumer exercises that rescission right. Federal Reserve Board Press Release.

• Agencies Release Joint Implementation Plan Concerning the Closure of the OTS.

On February 1st, the Federal Reserve Board, FDIC, OCC, and OTS published the Joint Implementation Plan explaining the steps the agencies have taken to transfer the authority and responsibilities of the OTS to the OCC, FDIC, and Federal Reserve Board.

• S.A.F.E. Act Mortgage Loan Originator Registration Period Opens.

On January 31st, the federal bank, thrift and credit union regulatory agencies, along with the Farm Credit Administration, announced that the Nationwide Mortgage Licensing System and Registry has begun accepting federal registrations. Under the Secure and Fair Enforcement for Mortgage Licensing Act and the agencies' final rules, residential mortgage loan originators employed by banks, savings associations, credit unions, or Farm Credit System institutions must register with the registry, obtain a unique identifier from the registry, and maintain their registrations. Joint Press Release; 76 FR 6185; OCC Bulletin 2011-6.

• Commodity Options and Agricultural Swaps.

On February 3rd, the CFTC published for public comment proposed rules generally permitting the transaction of swaps in an agricultural commodity subject to all rules and regulations applicable to any other swap. Because the Dodd-Frank Act defines commodity options (other than options on futures) as swaps, the proposed rules for options would substantially amend the CFTC's regulations regarding commodity option transactions. Comments should be submitted on or before April 4, 2011. 76 FR 6095.

• CPOs and CTAs: Amendments to Compliance Obligations.

On February 1st, the CFTC published the proposing release and text of amendments that would reinstate trading criteria for registered investments companies claiming exclusion from the commodity pool operator definition under Regulation 4.5; rescind the exemption from CPO registration under Regulations 4.13(a)(3) and (4); revise Regulation 4.7 so that CPOs may no longer claim exemption from the requirement that an exempt pool's annual report contain certified financial statements; modify the participant qualification criteria of Regulation 4.7 to incorporate the SEC's accredited investor standard by reference rather than by direct inclusion of its terms; require all persons claiming exemptive or exclusionary relief under Regulations 4.5, 4.13, and 4.14 to confirm their notice of claim of exemption or exclusion on an annual basis; and amend the risk disclosure statement that must be included in CPO and commodity trading advisors disclosure documents to describe certain risks specific to swaps transactions. Comments should be submitted within 60 days after publication in the Federal Register, which is expected during the week of February 7. Proposed Amendments.

• Swap Execution Facilities.

On February 3rd, the Washington Post with Bloomberg reported that the CFTC's proposed rules for the registration and operation of swap execution facilities are more restrictive than those for exchanges. Swap Execution Facilities.

• CFTC Seeks ID System.

On January 28th, Reuters reported on the CFTC's efforts to establish an identification system for swaps trading. Identification System.

• Registration and Regulation of Security-Based Swap Execution Facilities.

On February 2nd, the SEC published proposed Regulation SB SEF under the Securities Exchange Act of 1934. The proposed regulation is designed to create a registration framework for security-based swap execution facilities (SB SEFs); establish Core Principles compliance rules; and implement a process for the submission of proposed SB SEF rule changes. The SEC also published a proposed interpretation of the definition of "security-based swap execution facility" to provide guidance on the characteristics of those systems or platforms that would satisfy the statutory definition. In addition, the SEC proposed amendments to Rule 3a-1 under the Exchange Act to exempt a registered SB SEF from the Exchange Act's definition of "exchange" and to add Rule 15a-12 under the Exchange Act to exempt, subject to certain conditions, a registered SB SEF from regulation as a broker. Comments should be submitted on or before April 4, 2011. SEC Release No. 34-63825; SEC Press Release. See also Schapiro Remarks.

• Open Meeting.

The SEC will hold an Open Meeting on February 9, 2011, where it is scheduled to consider whether to propose amendments to rules and forms under the Securities Act of 1933 and Schedule 14A under the Securities Exchange Act of 1934, to replace references to credit ratings with alternative criteria. SEC Open Meeting Notice.

• SEC Wants Better Litigation Risk Disclosure.

On February 3rd, Reuters reported that a study of SEC comment letters found that SEC staff are asking issuers, particularly financial services companies, to provide more information about litigation risk. Disclosures.

• Alternative Up-Tick Rule.

On February 1st, Bloomberg reported that the Securities Industry and Financial Markets Association wrote to the SEC to oppose the alternative up-tick rule which would limit the short sale of a stock that declined more than 10 percent the previous day. Opposition.

• Money Market Mutual Fund Information is Publicly Available.

On January 31st, the SEC announced the public availability of the information that money market mutual funds disclose on Form N-MFP, which includes information on a fund's holdings and net asset value. SEC Press Release.

• Reporting Requirements Rule Approved for Inclusion in FINRA Consolidated Rulebook.

On February 3rd, the Financial Industry Regulatory Authority announced that the SEC has approved FINRA's proposal to adopt a rule governing reporting requirements for the consolidated FINRA rulebook. The new rule, FINRA Rule 4530, is based in large part on NASD Rule 3070, taking into account certain requirements under NYSE Rule 351. The new rule is effective July 1, 2011. FINRA Regulatory Notice 11-06.

• Arbitration Panel Composition.

On February 1st, FINRA announced that, effective immediately, customers in FINRA arbitrations have the option to choose an all public arbitration panel in all cases with three arbitrators. FINRA Regulatory Notice 11-05. See also FINRA Press Release. See also SEC Release No. 34-63799.

• Books and Records Rules Approved for Inclusion in Consolidated Rulebook.

On January 27th, the SEC approved FINRA's proposed adoption of rules regarding books and records in the consolidated FINRA Rulebook. SEC Release No. 34-63784.

• Proposed Amendments to NASDAQ Options Market Rules.

On February 1st, the SEC provided notice of the NASDAQ Stock Market's proposed amendments to: permit market maker assignment by option rather than by series; adopt a $5 quotation spread parameter; and amend the quoting requirement for Market Makers. These changes are scheduled to be implemented on or about May 1, 2011. NASDAQ will announce the implementation schedule by Options Trader Alert once the rollout schedule, which will be based in part on participants' readiness, is finalized. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of February 7. SEC Release No. 34-63815.

• SEC Institutes Disapproval Proceedings for Proposed Rule Concerning Fees and Rebates.

On January 28th, the SEC instituted proceedings to determine whether to disapprove the NASDAQ Stock Market's proposal to discount certain market data fees and increase certain liquidity provider rebates 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. The SEC is concerned that such a tying arrangement may not be consistent with the statutory requirements applicable to a national securities exchange, including requirements that market data fees be equitable, fair, and not unreasonably discriminatory. Comments should be submitted on or before March 21, 2011. SEC Release No. 34-63796.

• SEC Institutes Disapproval Proceedings for Proposed Rule Concerning Commodity Stockpiling Companies.

On January 31st, the SEC instituted proceedings to determine whether to disapprove the NASDAQ Stock Market's proposal to adopt additional listing standards for companies that have indicated that their business plan is to purchase and stockpile raw materials or other commodities. The SEC believes that the proposal raises issues regarding the dissemination of up-to-date pricing information that is reliable, not subject to manipulation and equally available to market participants. Comments should be submitted on or before March 21, 2011. SEC Release No. 34-63804.

• Forex Regulatory Guide.

On February 4th, the National Futures Association published an updated regulatory guide to foreign exchange transactions.

• Annual Regulatory Reminder.

On February 3rd, the National Futures Association reminded members of their regulatory filing obligations. NFA Notice I-11-06.

• Timely Submission of Manual Contra-Side Information.

On January 31st, NYSE Regulation issued guidance on manually submitted contra-side trading information. To eliminate overnight trade break risk for manual transactions, especially at the opening (re-opening) and close of trading, all New York Stock Exchange and NYSE Amex members should check their OCS screens intraday and after 4:00 for closing trades every day to verify that all "DOT" trades are compared; and all "OARS" and/or "YB" submissions are compared correctly (side, price, quantity, etc.). NYSE Regulation Information Memo 11-5.

• Relative Performance Options are Proposed.

On February 1st, the SEC provided notice of The Options Clearing Corporation's proposal to accommodate the clearance of options on certain indexes measuring the relative performance of one reference security or reference index relative to a second reference security or reference index. A reference security may be an exchange-traded fund. The revised rules have been broadly drafted to cover Alpha Options and any similar product that may be listed on any participant exchange in the future. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of February 7. SEC Release No. 34-63811.

• SEC Form 13F Report is Held to be Constitutional.

On February 4th, the D.C. Circuit dismissed in part and denied in part a petition challenging the Constitutionality of the disclosures required by the Securities Exchange Act's Form 13F Report, which requires certain institutional investment managers to disclose investment information. The information is made public unless an exemption or a request for confidential treatment is granted. The Court held that to the extent petitioner's claims rest on potential public disclosures of its investment positions, they are not ripe. On the merits, the Court held that mere disclosure to the SEC does not raise First Amendment concerns. Nor does disclosure raise Fifth Amendment concerns even assuming that petitioner has a cognizable property interest in knowledge of its investment positions. Full Value Advisors, LLC v. SEC.

• The "Availability" of Funds.

On February 3rd, the Second Circuit addressed what the term "available" funds means in a banking relationship. The Court held that, as used here, "available" meant that account balances were available for use on a provisional basis, subject to a charge back if a check was returned, and not, as plaintiff asserts, that the account balance represented collected funds. Fischer & Mandell LLP v. Citibank, N.A.

• Broker-Dealer Exemption from Investment Advisers Act Registration.

On February 2nd, the Tenth Circuit addressed the broker-dealer exemption from registration under the Investment Advisers Act. Plaintiffs alleged that defendant violated the Advisers Act when its unregistered financial services representative sold them a variable universal life insurance policy. Affirming the entry of summary judgment dismissing the claim, the Court held that the broker-dealer exemption from registration applies when advice is given in connection with conduct as a broker or dealer, so long as the broker-dealer does not receive compensation in exchange for advice, as opposed to for the sale of a product, and distinct from transaction-based compensation for the sale of a product. The importance of the advice is relevant only insofar as the advice cannot supersede the sale of the product as the "primary" goal of the transaction or the "primary" business of the broker-dealer. Thomas v. Metropolitan Life Insurance Co.

• Demand Futility is a Proper Purpose for Inspecting Books and Records.

On January 28th, the Delaware Supreme Court held that a shareholder has a proper purpose to inspect a firm's books and records when that inspection would aid the shareholder in pleading demand futility in a to-be-amended complaint in a plenary derivative action, where the earlier-filed plenary complaint was dismissed on demand futility-related grounds without prejudice and with leave to amend. King v. Verifone Holdings, Inc.

• Issuer Review of Assets in Offerings of Asset-Backed Securities - Effective March 28, 2011.

The SEC is adopting new requirements in order to implement Section 945 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Specifically, the SEC is adopting a new rule under the Securities Act of 1933 to require any issuer registering the offer and sale of an asset-backed security ("ABS") to perform a review of the assets underlying the ABS. Also being adopted are amendments to Item 1111 of Regulation AB that would require an ABS issuer to disclose the nature of its review of the assets and the findings and conclusions of the issuer's review of the assets. 76 FR 4231.

• Disclosure for Asset-Backed Securities Required by Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act - Effective March 28, 2011.

Pursuant to Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,1 the SEC is adopting new rules related to representations and warranties in asset backed securities offerings. The final rules require securitizers of asset-backed securities to disclose fulfilled and unfulfilled repurchase requests. Our rules also require nationally recognized statistical rating organizations to include information regarding the representations, warranties and enforcement mechanisms available to investors in an asset-backed securities offering in any report accompanying a credit rating issued in connection with such offering, including a preliminary credit rating. 76 FR 4489.

• Shareholder Approval of Executive Compensation and Golden Parachute Compensation - Effective April 4, 2011.

On January 25, 2011, the SEC adopted rule to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to shareholder approval of executive compensation and "golden parachute" compensation arrangements. Section 951 of the Dodd-Frank Act amends the Securities Exchange Act of 1934 by adding Section 14A, which requires companies to conduct a separate shareholder advisory vote to approve the compensation of executives, as disclosed pursuant to Item 402 of Regulation S-K or any successor to Item 402. Section 14A also requires companies to conduct a separate shareholder advisory vote to determine how often an issuer will conduct a shareholder advisory vote on executive compensation. In addition, Section 14A requires companies soliciting votes to approve merger or acquisition transactions to provide disclosure of certain "golden parachute" compensation arrangements and, in certain circumstances, to conduct a separate shareholder advisory vote to approve the golden parachute compensation arrangements. 76 FR 6010.

• Bankruptcy Court Applies Section 552 to Invalidate Lender's Security Interest in Proceeds of FCC License.

Recently, a Colorado bankruptcy court considered for the first time the effects of Bankruptcy Code Section 552 on a lender's security interest in the proceeds of an FCC broadcast license. Brief.

• 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.

• Papez to Discuss Dodd-Frank Whistleblower Provisions on Live Webinar.

Litigation partner Elizabeth Papez, based in Winston & Strawn's Washington, D.C. office, will speak on PLI's February 15 webinar titled "Dodd-Frank Whistleblower Provisions: Overview and Implications for FCPA Enforcement." Event.

• Winston Sponsors 2011 UNC School of Law Banking Institute.

Winston & Strawn will sponsor the 2011 UNC School of Law Banking Institute to be held March 31-April 1, 2011 in Charlotte. This program will provide continuing education on cutting-edge issues related to banking law. Event.

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