The Chicago Bears finished the season with a record of 7 and 9 and have now missed the playoffs for three straight years following their loss in Super Bowl XLI in 2007. Vowing massive change, the Bears fired most of their coaching staff, but curiously retained Head Coach Lovie Smith and General Manager Jerry Angelo. The question, of course, is whether those moves will have any impact whatsoever.

• Basel Committee Releases Report on the Differentiated Nature of Financial Regulation.

On January 8th, the Joint Forum of the Basel Committee on Banking Supervision released its report "Review of the Differentiated Nature and Scope of Financial Regulation - Key Issues and Recommendations." The report analyses key issues arising from the differentiated nature of financial regulation in the international banking, securities, and insurance sectors. It also addresses regulatory gaps. Bank of International Settlements Press Release. Retiring Chair of the Joint Forum, U.S. Comptroller of the Currency John C. Dugan, called specific attention to the report's finding on mortgage underwriting. OCC Press Release.

• Financial Crisis Inquiry Commission.

On January 8th, the Los Angeles Times reported that the Financial Crisis Inquiry Commission will hold hearings on the causes of the financial crisis beginning on January 13, 2010. The heads of Goldman Sachs Group Inc., JP Morgan Chase & Co., Morgan Stanley and Bank of America will testify. The Commission's website, which is still under construction, is www.fcic.gov. FCIC Hearings.

• Embezzlement Charges Leading Some to Rethink Auditor Attestation.

On January 7th, CFO.com reported that embezzlement charges against Sujata Sachdeva, the former vice president of finance at Koss Corp., are leading some to question the wisdom of exempting smaller companies from the auditor attestation requirements of the Sarbanes-Oxley Act. Auditor Attestation.

• Senate Banking Committee Nears Consensus.

On January 6th, Reuters reported that members of the Senate Banking Committee are nearing consensus on a financial reform bill. Broad agreement exists on limiting Federal Reserve Board authority to monetary matters. Consensus. On January 7th, the Washington Post reported that Committee Chairman Christopher Dodd's decision to not seek reelection increases the likelihood that meaningful bipartisan legislation will pass the Senate. Legislation.

• Interest Rate Risk Advisory.

On January 7th, the federal banking regulators released an advisory reminding depository institutions of supervisory expectations for sound practices in managing interest rate risk. The advisory clarifies elements of existing guidance and describes interest rate risk-management techniques used by effective risk managers. In an SR Letter to the heads of supervision at the Federal Reserve Banks, the Federal Reserve Board stated that, although the advisory is targeted at depository institutions, the advice provided is also directly pertinent to bank holding companies. Bank holding companies are reminded of supervisory expectations that they should manage and control aggregate risk exposures, including interest rate risk, on a consolidated basis, while recognizing legal distinctions and possible obstacles to cash movements among subsidiaries. Federal Reserve Board Press Release.

• FDIC Proposes Safe Harbor Protections for Securitizations.

On January 7th, the FDIC issued an Advance Notice of Proposed Rulemaking regarding safe harbor protection for treatment by the FDIC as conservator or receiver of financial assets transferred by an insured depository institution in connection with a securitization or participation. The FDIC has provided important safe harbor protections to securitizations by confirming that in the event of a bank failure, the FDIC would not try to reclaim loans transferred into a securitization so long as an accounting sale had occurred. However, with the Financial Accounting Standards Board June 2009 changes to FAS 166 and 167, most securitizations will no longer meet the off-balance sheet standards for sale treatment that took effect on January 1, 2010. The FDIC Board therefore approved a transitional safe harbor that permanently grandfathered securitization or participations in process through March 31, 2010. The ANPR seeks public comment on what standards should be applied to safe harbor treatment for transactions created after March 31, 2010. Comments should be submitted on or before February 22, 2010. See also FDIC Press Release.

• New York Fed Releases Staff Report on OTC Derivatives.

On January 7th, the Federal Reserve Bank of New York released a staff report on how the New York Fed and other regulators could improve weaknesses in the OTC derivatives market through stronger oversight and better regulatory incentives for infrastructure improvements to reduce counterparty credit risk and bolster market liquidity, efficiency, and transparency. Policy Perspectives on OTC Derivatives Market Infrastructure.

• Federal Reserve Board Considers Bond Sales.

On December 31st, Bloomberg reported that the Federal Reserve Board may sell bonds as part of its efforts to reduce liquidity. Bond Sales.

• Federal Reserve Board Approves Amendments to Check-Processing Regulations.

On December 31st, the Federal Reserve Board approved amendments to Appendix A of Regulation CC that reflect the restructuring of the Federal Reserve Banks' check-processing operations. The amendments are effective February 27, 2010. Federal Reserve Board Press Release.

• Open Meeting.

The CFTC will hold a public meeting on January 14th to consider issuance of a proposed rule on energy position limits and hedge exemptions for contracts traded on or subject to the rules of regulated futures exchanges and electronic trading facilities. CFTC Release No. 5771-10.

• CFTC Seeks Comments on the Clearing of CDS.

On January 6th, the CFTC requested comment on a revised petition submitted by the Chicago Mercantile Exchange regarding credit default swaps cleared by CME. CME is requesting that the CFTC issue an order under Section 4d of the Commodity Exchange Act that would permit CME and futures commission merchants clearing through CME to commingle customer funds used to margin, secure, or guarantee CDS cleared by CME with other funds held in the segregated account. Comments regarding the revised exemption request should be submitted on or before February 19, 2010. CFTC Release No. 5770-10.

• CFTC Chairman Speaks on OTC Derivatives Reform.

On January 6th, CFTC Chairman Gary Gensler, addressing the Council on Foreign Relations, discussed the need for comprehensive reform of over-the-counter derivative markets. That reform should include three components: explicit regulation of derivative dealers; transparent pricing; and the central clearing of standardized contracts. Gensler Remarks.

• CFTC Release Staff Report on Cotton Futures and Option Market Activity.

On January 5th, the CFTC released a staff report on cotton futures and option market activity during the week of March 3, 2008. The CFTC Division of Enforcement conducted an investigation and did not uncover evidence of price manipulation. CFTC Release No. 5769-10.

• Open Meeting.

The SEC will hold an Open Meeting on January 13th at which the Commissioners are expected to consider the publication of a concept release on equity market structure. The concept release is expected to address a wide range of issues, including the performance of equity market structure in recent years, high frequency trading, and undisplayed, or "dark," liquidity associated with alternative trading systems. The Commission is also expected to consider the proposal of a new rule regarding risk management controls and supervisory procedures to manage financial, regulatory and other risks for brokers or dealers that provide market access. Open Meeting Notice.

• New Gap Quote Policy Approved.

On January 4th, the SEC approved separately proposed guidance from the New York Stock Exchange and NYSE Amex providing updated parameters for, and guidance on the application of, each Exchange's Gap Quote Policy. Each policy provides that when an imbalance in a security exists, the security's Designated Market Maker should widen the bid/offer spread ("gapping the quote"), signaling the existence of the imbalance to the market in order to attract contra-side liquidity and mitigate volatility. As of January 11, 2010, the minimum size of an imbalance triggering a gap quote for a security will be reduced from 10,000 shares or a quantity with a value of $200,000, to 5,000 shares or $100,000. See also NYSE Information Memo 10-03.

• Minimum Net Loss Requirement Eliminated.

On January 6th, the SEC granted immediate effectiveness to separate amendments by NYSE Amex and the New York Stock Exchange to their respective rules to eliminate the $500 minimum net loss requirement for a member organization to seek compensation in the event of an exchange system failure. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of January 11th.

• Amendment on Simple Auction Liaison Executions Is Approved.

On December 30th, the SEC approved the Chicago Board Options Exchange's proposal to amend CBOE Rule 6.13A to revise the Designated Primary Market-Maker/Lead Market-Maker participation entitlement formula that is applicable to Simple Auction Liaison executions in Hybrid 3.0 classes on a one-year pilot basis. SEC Release No. 34-61259.

• FINRA Proposes Rules on Securities Lending.

On January 5th, the Financial Industry Regulatory Authority requested comment on proposed consolidated FINRA rules governing securities loans and borrowings, and permissible use of customers' securities and callable securities. Proposed FINRA Rule 4330 (Customer Protection--Permissible Use of Customers' Securities) sets forth the requirements applicable to a FINRA member firm's borrowing or lending of a customer's margin securities that are eligible to be pledged or loaned, while proposed FINRA Rule 4340 (Callable Securities) sets forth the obligations applicable to any callable securities that a member firm has in its possession or control. The proposal would to eliminate certain NASD and NYSE Rules and Rule Interpretations. Comments should be submitted on or before March 8, 2010. FINRA Regulatory Notice 10-03.

• Branch Renewals.

On January 5th, the FINRA issued a Regulatory Notice to help firms review, reconcile and respond to their Final Renewal Statements and reports, which are currently available in Web CRD/IARD for the 2010 Registration Renewal Program. FINRA Regulatory Notice 10-02.

• FINRA Proposes Amendments to Membership Rules.

On January 4th, FINRA requested comment on proposals relating to FINRA's membership rules. The proposed amendments consolidate, update and revise certain provisions of the existing membership rules to streamline the standards of review for new and continuing membership applications, clarify certain administrative aspects of FINRA's membership application process, update or eliminate outdated terminology, require certain additional information (including certain affiliate information) about the applicant, and incorporate certain provisions from the current Incorporated NYSE membership rules. The changes also impose new requirements on FINRA members to provide FINRA with information and notification of changes in their ownership, control or business operations. Comments should be submitted on or before March 5, 2010. FINRA Regulatory Notice 10-1.

• Financial Disclosure Rule Proposed.

On December 29th, the SEC provided notice of the Financial Industry Regulatory Authority's proposal to adopt FINRA Rule 2261 (Disclosure of Financial Condition) in the Consolidated FINRA Rulebook. The proposal would incorporate, subject to certain amendments, NASD Rule 2270, which requires a broker-dealer to permit customers to inspect or obtain copies of the broker-dealer's most recent balance sheet, and NASD Rule 2910, which requires any member that is a party to an open transaction or who has on deposit cash or securities of another member to furnish, upon the written request of the other member, a statement of its financial condition as disclosed in its most recently prepared balance sheet. Comments should be submitted on or before January 26, 2010. SEC Release No. 34-61253.

• NFA Reminds Members to Complete Questionnaire.

On January 6th, the National Futures Association reminded members to complete the Annual Questionnaire assessing members' futures-related and off-exchange forex business. NFA Notice I-10-02.

• Effective Dates of NFA Requirements Regarding On-Line Advertising and Social Networking Groups.

On January 5th, NFA advised that the CFTC has approved proposed amendments regarding the use of internet and on-line social networking groups when communicating with the public. The Interpretive Notice entitled "Use of On-Line Social Networking Groups to Communicate with the Public" makes clear that on-line communications are subject to the same standards as other types of communications with the public and provides guidance to Members to meet their responsibilities in this area. The Interpretive Notice became effective on December 24, 2009. A related amendment to Compliance Rule 2-29(h) requires that any audio or video distributed through media accessible by the public that makes any specific trading recommendation or refers to the extent of profit previously obtained or achievable in the future must be submitted to NFA for review and approval at least 10 days prior to first use. The amendments to Compliance Rule 2-29(h) become effective February 1, 2010. NFA Notice I-10-01. On January 4th, the SEC granted immediate effectiveness to the proposed amendments to NFA's Interpretive Notice and to the amendment of the Compliance Rule. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of January 11. SEC Release No. 34-61280.

• Relief Regarding the Security Futures Proficiency Exam Is Extended.

On January 4th, the SEC granted immediate effectiveness to the National Futures Association's proposed extension of the relief from having to take a proficiency exam to engage in security futures activities from December 31, 2009 to December 31, 2012. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of January 11th. SEC Release No. 34-61284.

• FCM Reminder.

On January 6th, NYSE Regulation reminded members of their obligations to confirm and/or update their list of Futures Commission Merchants on a semi-annual basis to the NYSE as required by Information Memo 03-09. NYSE Regulation Information Memo 10-02.

• Regulation NMS Reminder.

On January 5th, NYSE Regulation reminded members with a trading floor presence of their Regulation NMS obligations. NYSE Regulation Information Memo 10-01.

• NYSE to Allow More Than One Closing Print for Closing Transactions Exceeding 99,999,999 Shares.

On December 23rd, the SEC provided notice of the filing and immediate effectiveness of a proposal by the New York Stock Exchange to amend NYSE Rules 116 ("Stop" Constitutes Guarantee) and 123C (Market on the Close Policy and Expiration Procedures) to allow more than one closing print to be reported to the Consolidated Tape for closing transactions that exceed 99,999,999 shares. Currently, the closing transaction is reported as a single transaction via a single print, but a size limitation in a new market data distribution system prevents exchange systems from supporting prints greater than 99,999,999 shares. Thus, executions of greater than 99,999,999 shares must be sent to the Consolidated Tape in more than one print, which together will reflect the volume of the single closing transaction. Comments should be submitted on or before January 25, 2010. SEC Release No. 34-61235.

• Whistleblower Filing Procedure Clarified.

On December 31st, the Fourth Circuit, in an issue of first impression, held that the Sarbanes-Oxley Act's whistleblower provisions establish a complainant's right to de novo review in federal district court if the Labor Department does not issue a "final decision" within the statutory 180-day period. "[E]ven if the 180-day statutory period is arguably both overly aggressive and not the most efficient use of administrative and judicial resources, [complainant] was entitled to de novo review in the court below." Stone v. Instrumentation Laboratory Company.

• TILA Damages.

On December 31st, the Third Circuit, affirming the district court, holds that detrimental reliance must be pleaded and proved in order to recover actual damages sustained because of a disclosure violation under Sec. 1640(a) of the Truth in Lending Act. In doing so, the Court addresses the statute's language, its legislative history, other consumer lending laws, as well as other judicial opinions. Vallies v. Sky Bank.

• Amendments to Rules for Nationally Recognized Statistical Rating Organizations - Effective February 1, 2010.

The SEC is adopting rule amendments that impose additional disclosure and conflict of interest requirements on nationally recognized statistical rating organizations ("NRSROs") in order to address concerns about the integrity of the credit rating procedures and methodologies at NRSROs. 74 FR 63831.

• Proxy Disclosure Enhancements - Effective February 28, 2010.

The SEC is adopting rule amendments that will enhance information provided in connection with proxy solicitations and in other reports filed with the Commission. The amendments will require registrants to make new or revised disclosures about: compensation policies and practices that present material risks to the company; stock and option awards of executives and directors; director and nominee qualifications and legal proceedings; board leadership structure; the board's role in risk oversight; and potential conflicts of interest of compensation consultants that advise companies and their boards of directors. The amendments to disclosure rules will be applicable to proxy and information statements, annual reports and registration statements under the Securities Exchange Act of 1934, and registration statements under the Securities Act of 1933 as well as the Investment Company Act of 1940. The SEC is also transferring from Forms 10-Q and 10-K to Form 8-K the requirement to disclose shareholder voting results. 74 FR 68333.

• SEC Adopts Amendment to Advisers Act Custody Rule to Better Protect Investor Funds.

The Securities and Exchange Commission has issued a release adopting amendments to Rule 206(4)-2 and related recordkeeping rules and Forms ADV and ADV-E under the Investment Advisers Act of 1940, as amended. Briefing.

• FINRA Proposes New Rules to Govern Applications for Registration and Changes in FINRA-Member Firms.

The Financial Industry Regulatory Authority has proposed changes to NASD and NYSE membership application process (MAP) rules that will affect every FINRA-member broker-dealer that is involved in a merger or acquisition or that is undergoing a change in its control, ownership or business operations. While the MAP rule proposals consolidate and replace current NASD and NYSE rules and related interpretive material, they also include substantive changes to existing NASD and NYSE rules that will (1) increase the requirements on FINRA members and applicants for membership to provide certain information to FINRA in connection with obtaining approval from FINRA for changes in control, ownership or business operations; and (2) require FINRA members to provide notification of changes in their ownership, control or operations, that currently do not require any notice. Briefing.

• House Passes Legislation Requiring Most Private Fund Advisers to Register as Investment Advisers.

The United States House of Representatives recently passed its version of comprehensive financial regulatory reform, The Wall Street Reform and Consumer Protection Act of 2009 (the "Wall Street Reform Act"). One component of the Wall Street Reform Act, entitled the Private Fund Investment Advisers Registration Act of 2009 (the "Registration Act"), would require most investment advisers to hedge funds and other private funds to register as investment advisers under the Investment Advisers Act of 1940. Briefing.

• Ed Johnsen Quoted on Short Sale Regulation.

Winston & Strawn financial services partner Ed Johnsen was quoted in a January 6th Traders Magazine Online News article discussing how Congress is likely to enact new short sale rules as part of its pending overhaul of financial services regulation. Short Sales.

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