• Anti-Trust and Internet Rules.

On September 22nd, Reuters reported on the "dream team" of M&A attorneys hired by AT&T in order to salvage their proposed merger with T-Mobile. Also on the 22nd, ARS Technica reported on the Net Neutrality rules that go into effect on November 20th. Lawsuits filed by Verizon and MetroPCS may derail the plan. Both suits were filed earlier this year but were dismissed because the rules had yet to be finalized.

• Volcker Split.

On September 22nd, The Wall Street Journal reported on regulators struggling to work out the details on new restrictions for proprietary trading in a draft version of the so-called Volcker rule. They are split on how narrowly to define hedging transactions. Proposed language would define hedging broadly and allow banks to cover their risk on a "portfolio basis." The final rule is expected in late October. Proprietary Trading.

• Senate Pressures China on Yuan.

Senate Majority Leader Harry Reid stated on September 21st that the Senate has moved towards passing legislation that would pressure China into raising the value of its currency to the top of its agenda. The Yuan is currently undervalued to the point where U.S. companies can't compete with inexpensive Chinese products, fueling manufacturing job losses. Undervalued Yuan.

• Congress Flirts with U.S. Shutdown After Bill Fails.

Democrats and Tea Party-oriented Republicans alike shot down a spending bill in Congress on the evening of Wednesday, September 22nd. The House and Senate must now pass legislation before the previous stopgap funding measure runs out on October 1st in order to avoid a government shutdown. Deadline.

• Ponzi Mania.

On September 20th, The Washington Post reported that the SEC's general counsel who recommended how victims of the Madoff Ponzi scheme would be compensated did not recuse himself despite his family's inheritance from the Madoff fund. On September 21st, the Wall Street Journal reported on Justice Department findings that the Full Tilt Poker website illegally raided player accounts to fund operations and make lavish payments to its owners. Manhattan U.S. Attorney Preet Bharara said that Full Tilt's board of directors operated the company as a massive Ponzi scheme, defrauding players out of $444 million.

• Rating Agencies React to Change in U.S. Policy.

On September 20th, CNN reported that the SEC issued subpoenas in a probe investigating the possibility of insider trading prior to the downgrade of the U.S. credit rating by Standard & Poor's. The probe is focusing on firms that bet stocks would plummet in anticipation of the downgrade of the U.S. credit rating.

• FFIEC Releases Mortgage Data.

On September 22nd, the Federal Financial Institutions Examination Council (FFIEC) announced the availability of data on mortgage lending transactions at 7,923 U.S. financial institutions covered by the Home Mortgage Disclosure Act. FFIEC Press Release.

• Federal Reserve issues FOMC statement.

On September 21st, the Fed released its Federal Open Market Committee statement for the period of August 10-September 21, announcing that the Fed would extend the average maturity of its holdings of securities by purchasing $400 billion of Treasury securities with long-term remaining maturities and selling an equal amount of Treasury securities with short-term maturities. The Policy was passed by a vote of seven to three. FRB Press Release.

• Federal Reserve Board Issues Final Rule under Regulation B Regarding Data Collection Compliance Requirements for Motor Vehicle Dealers.

On September 20th, the Federal Reserve Board issued a final rule amending Regulation B to provide that motor vehicle dealers are not required to comply with new data collection requirements in the Dodd-Frank Act until the Board issues final regulations to implement the statutory requirements. The final rule will take effect upon publication in the Federal Register, which is expected shortly. Federal Reserve Press Release.

• Federal Reserve Announces Results of Auction.

On September 19th, the Federal Reserve conducted an auction of $5 billion in 28-day term deposits through its Term Deposit Facility. Results are summarized in the September 20th Press Release.

• Chairman Gruenberg Addresses American Banker Regulatory Symposium.

On September 19th, Acting Chairman of the FDIC, Martin J. Gruenberg, presented remarks at the American Banker Regulatory Symposium. Chairman Gruenberg focused on the condition of the U.S. banking system and outlined FDIC's priorities going forward. Gruenberg Remarks.

• Comptroller John Walsh Addresses American Banker Regulatory Symposium.

On September 19th, Acting Comptroller of the Currency, John Walsh, presented a Keynote address at the American Banker Regulatory Symposium. Topics presented included mortgage foreclosure processes and mortgage servicing accountability. Walsh Remarks.

• OCC Reports Q2 Trading Revenue of $7.4 Billion.

On September 16th, the OCC released their Quarterly Report on Bank Trading and Derivatives Activities for the second quarter of 2011. Commercial bank trading revenue was slightly lower than in the first quarter of 2011, but 11 percent higher than in the second quarter of last year. OCC News Release.

• Treasury Department Announces Public Offerings of Warrants to Purchase Common Stock of Suntrust Banks, Inc.

On September 21st, the Treasury Department announced that it has commenced a secondary public offering of 6,008,902 warrants to purchase the common stock of SunTrust Banks, Inc. (the "A" Warrants) and a secondary public offering of 11,891,280 warrants to purchase the common stock of SunTrust Banks, Inc. (the "B" Warrants). The Treasury Department stated that the proceeds of this sale will provide an additional return to the American taxpayer from Treasury's investment in SunTrust beyond the dividend payments it received on the related preferred stock. The offerings are expected to price through a modified Dutch auction. Deutsche Bank Securities Inc. is the sole book-running manager and Lebenthal & Co., LLC is the co-manager for the offerings. Treasury Department News Release.

• Treasury Releases International Capital Data For July.

On September 16th, Treasury released TIC data for July 2011. View the complete data on the Treasury website. Treasury Department News Release.

• CFTC Charges National Accounting Firm McGladrey & Pullen, LLP, and Partner David Shane with Failure to Properly Audit One World Capital Group, a Former Registered Futures Commission Merchant.

On September 22nd, the U.S. Commodity Futures Trading Commission (CFTC) filed and simultaneously settled an administrative proceeding against McGladrey & Pullen, LLP (McGladrey), a nationwide public accounting firm with offices in Chicago, Ill., and a McGladrey partner, David Shane, a certified public accountant (CPA) licensed in Illinois. The proceeding arose from a 2006 audit of One World Capital Group LLC and alleged failure to comply with capitalization and records requirements. CFTC Press Release.

• "Stages of Truth" - Remarks by Commissioner Bart Chilton.

On September 22nd, CFTC Commissioner Bart Chilton addressed the Presidential Roundtable on Speculation in Commodity Markets, saying: "I compiled about fifty studies, papers and quotations and put them on our website at CFTC.gov. I did so partly because it had seemed to me that the simple supply and demand rationale for higher energy and food prices this year and back in 2008 was very weak. There is no way anyone can explain oil prices going from $147.27 a barrel in June of 2008 to $30.28 in December of the same year based upon supply and demand. It simply can't be done." Chilton Remarks.

• Chairman Gensler Speaks on Swaps and other Post-Crisis Challenges.

CFTC Chairman Gary Gensler gave a closing keynote address at a Georgetown University Conference entitled "Financial Institutions in the New Regulatory Environment" on Thursday, September 22nd regarding opportunities in the swaps markets in the wake of the financial crisis of 2008, explaining the benefits and challenges of the Dodd-Frank Act. Gensler Remarks.

• Prohibition against Conflicts of Interest in Certain Securitizations.

On September 19th, the SEC proposed for comment a new rule under the Securities Act of 1933 ("Securities Act") to implement the prohibition under Section 621 of the Dodd-Frank Act on material conflicts of interest in connection with certain securitizations. Proposed Rule 127B under the Securities Act would prohibit certain persons who create and distribute an asset-backed security, including a synthetic asset-backed security, from engaging in transactions, within one year after the date of the first closing of the sale of the asset-backed security, that would involve or result in a material conflict of interest with respect to any investor in the asset-backed security. The proposed rule also would provide exceptions from this prohibition for certain risk-mitigating hedging activities, liquidity commitments, and bona fide market-making. Comments should be submitted on or before December 19, 2011. SEC Release No. 34-65355. See also SEC Press Release; Paredes Open Meeting Remarks; Aguilar Open Meeting Remarks; Schapiro Open Meeting Remarks.

• Director of Corporation Finance Testifies before House Committee on Financial Services.

On September 21st, Meredith Cross, Director of the Division of Corporation Finance, and Lona Nallengara, Deputy Director of the Division of Corporation Finance, testified about regulatory review of capital formation rules and new capital raising strategies. According to Reuters, in a footnote to Cross' testimony, the SEC noted that she recused herself from discussion of a particular capital raising strategy, crowdfunding, due to her previous work with a "social lending platform," Lending Club. In light of the Becker investigation (see below), the SEC has recently grown more cautious regarding potential ethical conflicts. Recusal.

• SEC Chairman Testifies before House Committees on Conflicts of Interest.

On September 22nd, Mary Schapiro, SEC Chairman, testified before members of the House Committees on Financial Services and Oversight and Government Reform about the potential conflict of interest concerning former General Counsel David Becker, who was involved with the investigation of Bernard Madoff's Ponzi scheme. Becker's mother had previously been an investor with Madoff, though her account was closed years before the fraud came to light. The SEC's Ethics Counsel cleared Becker to work on the case, but later questions arose regarding the appropriateness of his involvement, and the SEC's Inspector General opened an investigation. Schapiro Statement; OIG Report. The Inspector General, H. David Kotz, also testified. Inspector General's Testimony.

• Deputy Director of Trading and Markets Leaves SEC.

On September 19th, the SEC announced that James Brigagliano, Deputy Director of Trading and Markets will leave the agency at the end of September to work in the private sector. SEC Press Release.

• SEC Roundtable on Microcap Securities Announced.

On September 19th, the SEC announced that it will host a public roundtable on the execution, clearance, and settlement of microcap securities on October 17th. SEC Press Release.

• Bylaws of BATS Global Markets, Inc.

On September 19th, the SEC filed notice of proposed rule changes filed by BATS Exchange, Inc. and BATS Y-Exchange, Inc. to amend and restate the Amended and Restated Bylaws of BATS Global Markets, Inc. The amendments to the Current Bylaws include, among other things: (i) revising the procedures for stockholder proposals and nomination of directors; (ii) revising the authority to call special meetings of the stockholders; (iii) revising the process for action by written consent of stockholders; (iv) revising the requirements for removal of directors; (v) removal of provisions relating to indemnification of officers and directors; (vi) eliminating the authority to make loans to corporate officers; and (vii) revising certain requirements for approval of future amendments to the New Bylaws. Comments should be submitted on or before 21 days from publication in the Federal Register, which is expected during the week of September 26th. SEC Release Nos. 34-65352 and 34-65353.

• Allocation Algorithm.

On September 20th, a proposal by the C2 Options Exchange, Incorporated (C2) that, among other things, provides C2 with flexibility in establishing the allocation algorithm for its complex order book and complex order auction, was granted immediate effectiveness. Comments should be submitted on or before 21 days from publication in the Federal Register, which is expected the week of September 26th. SEC Release No. 34-65360.

• Automated Improvement Mechanism.

On September 21st, a proposal by C2 Options Exchange, Incorporated related to the Exchange's Automated Improvement Mechanism was granted immediate effectiveness. C2 Rule 6.51 governs the operation of an exchange feature that allows agency orders to electronically execute against principal or solicited interest pursuant to a crossing entitlement after being exposed in an auction. The purpose of this proposed rule change is to provide the exchange with the ability to determine to apply a price-time priority allocation algorithm for the SPXPM option class, subject to certain conditions. Comments should be submitted on or before 21 days from publication in the Federal Register, which is expected the week of September 26th. SEC Release No. 34-65371.

• Exchange-Registered Institutional Broker Firms.

On September 19th, the SEC filed noticed of the Chicago Stock Exchange, Inc's proposal to change the status of Exchange-Registered Institutional Broker firms. The CSE is proposing to add Interpretation and Policy .04 to Article 17, Rule 3 to clarify the status of Exchange-registered Institutional Broker firms (Institutional Brokers) as not operating on the Exchange. Comments should be submitted on or before 21 days from publication in the Federal Register, which is expected the week of September 26th. SEC Release No. 34-65354.

• Indications of Interest.

On September 20th, FINRA requested comments on proposed amendments to FINRA Rule 5210 to require that member firms receive a customer order in a security before displaying a quotation or indication of interest (IOI) in a way that purports to represent the quotation or IOI as having originated with a customer, for example, by marking it as a "natural." FINRA Regulatory Notice 11-43.

• Exemptions for Reporting for Certain Alternative Trading Systems.

On September 16th, the Financial Industry Regulatory Authority filed with the SEC a proposed rule change relating to exemption from reporting obligation under Equity Trade Reporting Rules. Proposed Rule SR-FINRA-2011-051.

• Order Execution.

On September 20th, the SEC granted approval of a proposal by International Securities Exchange, Inc. to codify an existing policy related to the application of ISE Rules 717(d) and (e). ISE Rules 717(d) and (e) require members to expose orders entered on the limit order book for at least one second before executing them as principal or against orders that were solicited from other broker-dealers. SEC Release No. 34-65361.

• Electronic Municipal Market Access.

On September 16th, the SEC granted immediate effectiveness to a proposal by the Municipal Securities Rulemaking Board to extend the effective date of the amendment to the Continuing Disclosure Service of its Electronic Municipal Market Access system (EMMA) to provide for the posting of credit rating and related information on the EMMA public website. Comments should be submitted on or before October 13, 2011. SEC Release No. 34-65346.

• NYSE's Listed Company Manual.

On September 21st, the SEC designated a longer period for its action on a proposed rule change filed by the New York Stock Exchange LLC to amend Sections 102.01 and 103.01 of the Exchange's Listed Company Manual to adopt additional listing requirements for companies applying to list after consummation of a "reverse merger" with a shell company. SEC Release No. 34-65368.

• Auctions.

On September 21st, the SEC filed notice of the Options Clearing Corporation's amendment to proposed rule change that provides specific authority to use an auction process as one of the means to liquidate a defaulting clearing member's accounts. Comments should be submitted on or before 15 days from publication in the Federal Register, which is expected the week of September 26th. SEC Release No. 34-65370.

• Antitrust Claims Are Not "Personal and Advertising Injury."

In a case decided by the 11th Circuit on September 19th, Trailer Bridge, Inc. sought coverage under the "personal and advertising injury" component of its commercial general liability policy for antitrust claims leveled against it. The company argued that the CEO's statement to an investor group regarding how prices were set constituted "advertising." The appellate court affirmed the District Court's grant of summary judgment for the insurance company, holding that the CEO's statement was not "advertising" and did not involve use of "another's advertising idea," as required under the policy. Moreover, the antitrust action did not seek recovery for misappropriation of an "advertising idea." Trailer Bridge, Inc. v. Illinois National Ins. Co.

• Culpability Required for Securities Fraud Exception to Debt Discharge in Bankruptcy.

On September 19th, the Ninth Circuit considered whether the exception to Chapter 7 bankruptcy discharge for debts resulting from a violation of state or federal securities laws applies when the debtor himself is not culpable for the securities violation that caused the debt. The case involved an attorney who was required by court order to return the unearned retainer paid by a company that engaged in securities fraud. The attorney filed a petition for Chapter 7 bankruptcy before he was technically required to return the money. The court held that the discharge exception applies only to those who have themselves violated the securities laws, so the disgorgement debt in this case could be completely discharged. In the Matter of Sherman.

• Large Trader Reporting - Effective October 3, 2011.

The SEC has adopted new Rule 13h-1 and Form 13H under Section 13(h) of the Securities Exchange Act of 1934 to assist the SEC in both identifying and obtaining trading information on market participants that conduct a substantial amount of trading activity, in the U.S. securities markets. Among other things, Rule 13h-1 will require a "large trader," defined as a person whose transactions in NMS securities equal or exceed 2 million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month, to identify itself to the SEC and make certain disclosures to the SEC on Form 13H. 76 FR 46960. See the Winston and Strawn Briefing on the new requirements.

• Privacy Act of 1974: Implementation and Amendment of Exemptions - Effective October 17, 2011.

The SEC has adopted a rule to amend its Privacy Act regulations to exempt portions of three new systems of records and to make technical amendments to its current inventory of exempted systems of records. Specifically, application of the exemptions to the three new systems of records is necessary to protect information compiled for law enforcement purposes. 76 FR 57636.

• Winston & Strawn Sponsors TMA's 2011 Annual Convention.

Winston & Strawn will sponsor the 2011 Turnaround Management Association (TMA) Annual Convention, to be held October 25-27, 2011 in San Diego. Twitter co-founder Biz Stone is the keynote speaker. Event.

• Winston & Strawn Sponsors 16th Annual LSTA Conference.

Winston & Strawn is sponsoring the 16th Annual Loan Syndications and Trading Association's (LSTA) Conference to be held on November 2, 2011 in New York. Event.

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