On Saturday, November 7th, by a narrow margin the House of Representatives finally passed its healthcare reform bill which had consumed most of its time over the past several weeks. Now it is the Senate's turn to move its version of the healthcare legislation. Many are hopeful that this will occur before the end of this year, but a definitive timeline is uncertain at this point.

• House Committee Chairman Seeks SEC and CFTC Input on Derivatives Legislation.

On November 3rd, Representative Barney Frank, Chairman of the House Financial Services Committee, wrote to SEC Chairman Mary L. Schapiro and CFTC Chairman Gary Gensler requesting their comments on proposed derivatives legislation passed by the Committee. Frank intends to amend the current bill to clarify who can claim an exception from the bill's clearing requirement and to specify that the regulators, not the clearinghouses, will decide how a privately traded derivative will be cleared. Letter.

• New FTC Rule Regulates Energy Prices.

Exercising the authority provided by Congress under the Energy Independence and Security Act of 2007 (EISA), the Federal Trade Commission has issued a rule prohibiting market manipulation -- that is, fraudulent or deceptive acts, practices, or courses of business -- in the wholesale petroleum industry. The Rule prohibits fraud or deceit in wholesale petroleum markets, and omissions of material information that are likely to distort petroleum markets. The Final Rule has become effective on November 4, 2009. Energy Prices.

• States Considering Pursuing Consumer Fraud Suits Against Banks.

On November 2nd, the New York Times reported that after the Supreme Court's decision in Cuomo v. Clearing House Association, L.L.C., 129 S. Ct. 2710 (2009), which allows states to enforce their consumer protection laws against national banks, many states attorney general are considering consumer fraud lawsuits against the banks who allegedly perpetuated the subprime loan market. States Attorney General.

• Senator Introduces "Too Big to Fail" Legislation.

On November 6th, Senator Bernie Sanders introduced the "Too Big to Fail, Too Big to Exist Act," which would break-up large financial institutions deemed too big to fail. It would give the Treasury Secretary 90 days to compile a list of commercial banks, investment banks, hedge funds and insurance companies determined to be too big to fail. Sanders Press Release.

• House Committee Reports the Investor Protection Act.

On November 4th, the House Financial Services Committee reported H.R. 3817, the Investor Protection Act, which enhances the SEC's enforcement authority and budget, harmonizes the fiduciary duty standard owed by broker-dealers and investment advisers, and provides the PCAOB with examination authority over broker-dealer auditors. House Financial Services Committee Press Release.

• Senate Banking Committee Chairman Drafts Regulatory Reform Bill.

On November 4th, the Washington Post reported that Christopher Dodd, Chairman of the Senate Banking Committee, is drafting a financial regulatory reform bill that would create a single banking regulator in addition to other matters, such as the overhaul of how OTC derivatives trade in the U.S. Senate Bill.

• Committee Votes to Exempt Smaller Companies from Auditor Attestation Requirements.

The House Financial Services Committee adopted, on a voice vote, an amendment exempting smaller companies from the auditor attestation requirements of the Sarbanes-Oxley Act. The amendment is opposed by Committee Chairman Barney Frank who has called for another vote. Exemption.

• House Passes Bill Accelerating Effective Date of the Credit CARD Act.

On November 4th, the House of Representative overwhelmingly approved H.R. 3639, a bill that would accelerate the effective date of credit card reforms scheduled for next year to immediately upon the signing of the bill. House Financial Services Committee Press Release.

• Chairman Frank Supports Pre-Payment by Systemically Important Firms.

Representative Barney Frank, Chairman of the House Financial Services Committee, supports a proposal requiring systemically important non-bank financial institutions to pre-pay into a fund whose assets would be used in the event of a member's failure. Pre-Payment.

• FDIC to Vote on the Prepayment of Assessments.

The FDIC will meet on November 12th to consider, among other things, the adoption of a rule requiring member institutions to prepay assessments. FDIC Notice.

• OCC Publishes Working Paper.

On November 5th, the OCC published "The U.S. Financial System in 2011: How Will Sufficient Credit Be Provided?" an Economics and Policy Working Paper using Flow of Funds data to construct a bird's-eye view of what the credit-provision landscape might look like, particularly for banks, once the current financial system turmoil subsides.

• Additional Initial Closings of Legacy Securities PPIF Announced.

On November 3rd, the Department of the Treasury announced that on October 30, 2009 Angelo, Gordon & Co., L.P. and GE Capital Real Estate completed an initial closing of a Public-Private Investment Fund established under the Legacy Securities Public-Private Investment Program. Treasury Department Nov. 3 Press Release. On November 5th, the Treasury Department announced that RLJ Western Asset Management, LP, has completed an initial closing of a PPIF. Treasury Department Nov. 5 Press Release.

• OFAC Issues Enforcement Guidelines.

On November 2nd, the Office of Foreign Assets Control of the Treasury Department issued guidelines for enforcement of the economic sanctions programs that it administers. Draft Federal Register Notice.

• Treasury Designates Bank Mellat Subsidiary and Chairman Under Proliferation Authority.

On November 5th, the Department of the Treasury designated First East Export Bank, a Bank Mellat subsidiary located in Malaysia and the Chairman of Bank Mellat, Ali Divandari. The designations freeze the assets of designated proliferators of weapons of mass destruction and their supporters, and prohibits U.S. persons from engaging in any transactions with them. Treasury Department Press Release.

• Treasury Removes Terrorist Suspects from Specially Designated Nationals List.

On November 3rd, the Treasury Department's Office of Foreign Assets Control removed Patricia Rosa Vinck, Barakaat International, and Barakaat International Foundation from its Specially Designated Nationals List, having found that Vinck and the two entities no longer present a significant threat of supporting terrorism. Treasury Department Press Release.

• DCIO Issues an Interpretation Regarding a Commodity Pool Comprised of Close Family Members.

On October 20th, the CFTC's Division of Clearing and Intermediary Oversight issued an interpretation that a family partnership is not a commodity pool where all participants are close family members. The interpretation would not be affected by family members forming a CTA which will manage both the family partnership's commodity interest trading and the trading of non-related persons. CFTC Letter No. 09-46.

• Compliance Date for Regulation S-AM Extended.

On November 5th, the SEC extended from January 1, 2010 to June 1, 2010, the compliance date for Regulation S-AM, which limits a person's use of certain information received from an affiliate to solicit a consumer for marketing purposes unless the consumer has been given notice and a reasonable opportunity and a reasonable and simple method to opt out of such solicitations. SEC Release No. 34-60946.

• SEC Chairman Wants Self-Funding.

On November 6th, Reuters reported that SEC Chairman Mary L. Schapiro, in an address at Harvard University, said that she would like the agency to be self-funded. Self-Funding.

• Street Name System of Ownership Rules.

On November 4th, Reuters reported the SEC may revise the street name system of ownership rules. Anonymity.

• SEC Forum on Small Business Capital Formation.

On November 3rd, the SEC published the agenda for its November 19, 2009 Forum on Small Business Capital Formation.

• SEC Inspector General Makes Available Exhibits to its Report on the Madoff Ponzi Scheme.

On October 30th, the SEC Office of Inspector General made available on its website the exhibits to its August 31, 2009 Report on the SEC's failure to uncover Bernard Madoff's Ponzi scheme. The exhibits include transcripts of interviews with for example, Harry Markopolos, who had reported to the SEC his suspicions concerning Madoff's activities, and current and former SEC staff who examined Madoff's operations. See also Exhibit List (index of exhibits); New York Times; Washington Post; Reuters.

• SEC Issues Fee Rate Advisory.

On October 30th, the SEC announced that the continuing resolution funding the Commission for fiscal year 2010 since October 1, 2009, is being extended through December 18, 2009. During this period, fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) the Securities Exchange Act of 1934 will remain at the current rate of $55.80 per million dollars, while fees paid under Section 31 of the Securities Exchange Act of 1934 will remain at the current rate of $25.70 per million dollars. Fee Rate Advisory No. 3.

• Amendment Permitting Quoting and Trading below $.01 Is Immediately Effective.

On November 3rd, the SEC granted immediate effectiveness to individually proposed amendments from the New York Stock Exchange and NYSE Amex changing their respective Exchange Rules to support quoting and trading in a minimum price variation below $.01 for securities traded on the exchange for orders or interest priced below $1.00 per share. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of November 9.

• Proposed Changes to Optional Anti-Internalization Functionalities are Immediately Effective.

On October 28th, the SEC granted immediate effectiveness to individually proposed rule changes by the NASDAQ Stock Market and the NASDAQ OMX BX providing an additional alternative to their respective voluntary anti-internalization functionalities. Under the proposals, market participants will be given an additional option when entering quotes and orders using the same market participant identifier that they do not wish to have automatically interact with each other in either System. This option will direct the Systems to not execute any part of the interacting quotes/orders from the same MPID and, instead, cancel the oldest of the interacting quotes/orders back to the entering party. Comments should be submitted on or before November 25, 2009.

• CBSX to Open at 8:00 AM (Central Time).

On October 30th, the SEC granted immediate effectiveness to the Chicago Board Options Exchange's proposal to change the time at which CBSX opens for trading from 8:15 a.m. Central Time to 8:00 a.m. Central Time. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of November 9. SEC Release No. 34-60910.

• FINRA Reminds of 2010 Renewal Process.

On November 4th, FINRA reminded members that the 2010 renewal process begins on November 16, 2009, when online Preliminary Renewal Statements are made available to all firms on Web CRD/IARD. FINRA Regulatory Notice 09-62.

• Amendment to Definition of "Narrow-Based Index" is Immediately Effective.

On October 29th, the SEC granted immediate effectiveness to the International Securities Exchange's proposed amendment of ISE Rule 2001(i) to clarify the definition of "industry index" and "narrow-based index" to include indices having component securities that are all headquartered within a single country. Comments should be submitted on or before November 27, 2009. SEC Release No. 34-60902.

• ISDA to Publish Auction Terms for CIT.

On November 3rd, the International Swaps and Derivatives Association announced that it will publish auction terms for CIT Group Inc. on its website. ISDA Press Release.

• Changes to Nasdaq Opening Cross are Immediately Effective.

On October 30th, the SEC granted immediate effectiveness to the NASDAQ Stock Market's proposal for the NASDAQ Options Market which would modify Chapter VI, Section 8 of the Exchange's rules, dealing with the Nasdaq Opening Cross. The Exchange proposes to implement this change on or about November 23, 2009. Comments should be submitted on or before November 27, 2009. SEC Release No. 34-60905.

• Exchange Proposes Modifications to Listing Fees.

On October 28th, the SEC provided notice of the NASDAQ Stock Market's filing of a proposed rule change modifying the fees for listing on the Nasdaq Stock Market and the fee for written interpretations of Nasdaq listing rules. Comments should be submitted on or before November 25, 2009. SEC Release No. 34-60899.

• NYSE Regulation Reminds of Filing Deadline.

On November 5th, NYSE Regulation reminded members designated to NYSE Amex for financial responsibility purposes of the annual audited financial statements requirement of Securities Exchange Act Rule 17a-5(d). NYSE Regulation Information Memo 09-51.

• NYSE Regulation Issues Information Memo on Proprietary Trading.

On October 30th, NYSE Regulation issued an Information Memo reminding members of, among other things, the obligations under NYSE Rule 407 and NYSE Amex Equities Rule 407 as they relate to members, employees, and associated persons' trading in personal securities and commodities accounts. In addition, the Information Memo reminds members and member organizations of their related investigatory and reporting responsibilities under Rule 351(e). NYSE Regulation Information Memo 09-50.

• Continued Listing Requirement Pilot Extended.

On November 2nd, the SEC granted immediate effectiveness to the New York Stock Exchange's proposed extension until February 28, 2010, of the operation of an amendment to the continued listing requirements in Section 802.01B of the Exchange's Listed Company Manual that is currently in effect on a pilot program basis. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of November 9. SEC Release No. 34-60911.

• Commentary on Reduced-Value Index Options Is Immediately Effective.

On October 30th, the SEC granted immediate effectiveness to NYSE Amex's proposed addition of Commentary .04 to Rule 904C to clarify position limits on reduced-value index options. Comments should be submitted on or before November 27, 2009. SEC Release No. 34-60907.

• Trial Courts Lack Authority to Appoint Counsel under PSLRA.

On November 5th, the Ninth Circuit partially granted a petition for mandamus and ordered the district court to vacate its order appointing a law firm as co-lead counsel in a class action securities fraud lawsuit. Although the Private Securities Litigation Reform Act allows a trial court to reject a lead plaintiff's choice of counsel, it does not give the court the authority to select lead counsel. For that same reason, the Court denied that portion of the mandamus petition requesting the Ninth Circuit to appoint the lead plaintiff's counsel of choice. Rather, lead plaintiff should submit its choice to the court for review as required by the PSLRA. When it reviews that selection, the district court should not reject plaintiff's choice simply because the court might have chosen differently. Roberto Cohen v. U.S. District Court for the Northern District of California.

• Disciplinary Action for Innocent Disclosure of Confidential Deal Information is Affirmed.

On November 4th, the Second Circuit held that bad faith did not need to be proved to establish a violation of a self-regulatory organization's just and equitable rule. The NYSE found that petitioner violated its just and equitable rule by innocently disclosing a client's confidential deal information to a third party and the SEC affirmed. Affirming the SEC, the Second Circuit held that bad faith does not need to be shown to establish a violation of the rule and that the petitioner had notice that his conduct was sanctionable. Finally, the Court found that any procedural errors that may have occurred before the NYSE were cured by the SEC's de novo review. Heath v. SEC.

• ERISA Plan Participant Cannot Sue Fiduciaries of Overfunded Defined-Benefit Plan.

On November 3rd, a divided panel of the Eighth Circuit affirmed the district court and held that the plaintiff, a participant in a defined-benefit pension plan, could not sue defendants, plan sponsors, for violations of their ERISA fiduciary duties because the plan was overfunded during the period in question. Rejecting the plaintiff's contention, the Eighth Circuit found that the Supreme Court's decision in Sprint Communications Co. v. APCC Services, Inc., 128 S. Ct. 2531 (2008), which held that an assignee of a legal claim for money owed has standing to pursue that claim in federal court, even when the assignee has promised to remit the proceeds of the litigation to the assignor, does not permit a participant in an overfunded ERISA plan to sue fiduciaries based on an injury to the plan. McCullough v. AEGON USA, Inc.

• Supreme Court Hears Oral Argument in Mutual Fund Fees Case.

On November 2nd, the Supreme Court heard oral argument in Jones v. Harris Associate, L.P., Docket No. 08-586, concerning whether a mutual fund shareholder claiming that the fund's investment adviser charged an excessive fee must show that the investment adviser misled the mutual fund's directors who approved the fee. The Supreme Court's transcript of the oral argument reveals the Justices' interest in the standard of fiduciary duty owed by an investment adviser to a mutual fund. See also Bloomberg.

• Fifth Circuit Hears Oral Argument in Clawback Case.

On November 2nd, Reuters reported on oral arguments presented to the Fifth Circuit concerning the receiver's ability to clawback assets redeemed by investors who purchased certificates of deposits from Allen Stanford's banks. Oral Argument.

• SEC and Solicitor General Submit Amicus Brief on Inquiry Notice.

On October 26th, the U.S. Solicitor General, with the SEC, submitted to the Supreme Court an amicus brief in support of petitioners in Merck & Co., Inc. v. Reynolds, Docket No. 08-905 and arguing that the limitations period for a private securities fraud claim does not begin to run until the plaintiff has actually discovered, or in the exercise of reasonable diligence ought to have discovered, facts demonstrating that all the elements of a securities fraud violation can be established.

• References to Ratings of Nationally Recognized Statistical Rating Organizations - Effective November 12, 2009.

The SEC is adopting amendments to certain of its rules and forms to remove references to securities credit ratings. The SEC is eliminating certain references to credit ratings issued by nationally recognized statistical rating organizations related to the regulation of self-regulatory organizations and alternative trading systems, and in rules that affect an investment company's ability to purchase refunded securities and securities in underwritings in which an affiliate is participating. The SEC believes that the references to credit ratings in these rules and forms are no longer warranted as serving their intended purposes. The amendments are designed to address concerns that references to NRSRO ratings in Commission rules may have contributed to an undue reliance on those ratings by market participants. In a companion release, the Commission is re-opening the comment period for certain other proposed rule and form amendments that would eliminate additional references to NRSRO ratings. 74 FR 52357.

• Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers - Effective December 18, 2009.

The SEC is amending temporary rules that require companies that are non-accelerated filers to include in their annual reports, pursuant to rules implementing Section 404(b) of the Sarbanes-Oxley Act of 2002, an attestation report of their independent auditor on internal control over financial reporting for fiscal years ending on or after December 15, 2009. The amendments will extend the compliance date for filing attestation reports, so that a non-accelerated filer will be required to file the auditor's attestation report on internal control over financial reporting when it files an annual report for a fiscal year ending on or after June 15, 2010. 74 FR 53627.

• Michael Mancusi Will Present at the American Bar Association Banking Law Committee 2009 Fall Meeting.

Michael will moderate a panel titled "Industry and Government Litigation and Enforcement Trends/Mitigation" that will discuss recent litigation and enforcement trends in the banking industry and provide insight into how institutions can mitigate their exposure to such risks. The meeting will be held November 12 - 14, 2009 in Washington, D.C. Event Information.

• Delaware Court Holds That Fiduciary Disclosure Principles Do Not Apply to ROFR Purchases.

In an intriguing case of first impression, the Delaware Court of Chancery recently held in Latesco, L.P. v. Wayport, Inc. that fiduciary disclosure principles do not apply to purchases by insiders pursuant to contractual "right of first refusal" provisions. Briefing.

• SEC Proposes to Eliminate Flash Orders.

On September 18, 2009, the Securities and Exchange Commission issued a proposal to eliminate the "flash order" exception from the quotation dissemination requirements of Rule 602 of Regulation NMS under the Securities and Exchange Act of 1934, as amended. Briefing.

• Revisions to Forms U4 and U5-Action Required by November 14.

In May 2009, the SEC approved a proposal by the Financial Industry Authority to modify Forms U4 and U5 in several ways. The revised forms contain additional disclosure questions regarding regulatory actions brought against industry employees, which are designed to enable FINRA and other regulators to more readily identify persons who are subject to disqualification from participation in the securities industry. Briefing.

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