The first week in March is marked with uncertainty in the financial services industry as stock markets around the world struggle to stabilize. In the United States, the uncertainty over the direction of the markets is combined with uncertainty over new trading rules, as exchanges and electronic communication networks begin complying with the Trading Phase of Securities and Exchange Commission Regulation NMS. With this as a start, the month of March promises to be a roller-coaster ride in financial services.

• Court Enjoins Enforcement of Illinois Sudan Act.

The U.S. District Court in Chicago has ruled that the "Illinois Sudan Law" is unconstitutional and has permanently enjoined its enforcement. The law, enacted in 2005, prohibits the deposit of Illinois state funds in any financial institution that fails to certify that neither it nor any of its borrowers do business related to Sudan. The law also prohibits public employee pension funds in the state from investing in any company (including indirect investments through mutual funds) that has commercial connections to Sudan. Because the Illinois law conflicts with the federal regulations relating to Sudan--for example, by penalizing conduct that the federal government permits or even encourages--it was held to violate the federal Constitution and to interfere with the federal government's authority to conduct foreign affairs. Winston & Strawn represents the plaintiffs--the National Foreign Trade Council, eight Illinois pension funds, and seven individual beneficiaries of those funds. National Foreign Trade Council, Inc. v. Giannoulias, Case No. 06 C 4251 (decided Feb. 23, 2007). Briefing.

• Federal Bill Would Collect Information on State Incorporators.

Senators Carl Levin and Barack Obama and Representative Rahm Emanuel have written the National Governors Association seeking state support for federal legislation requiring incorporating agents to collect information concerning their clients' identities. Incorporation.

• Senators Seek Additional Delay for Full Section 404 Implementation.

On February 27th, CFO.com reported Senators John Kerry and Olympia Snowe have written the SEC and PCAOB to request that the regulators delay for one year the internal control reporting requirements for smaller public companies. Delay.

• Neiman Nominated by Spitzer to be NY Superintendent of Banking.

Richard H. Neiman will be nominated to serve as Superintendent of the New York State Banking Department. Mr. Neiman currently serves as Chairman, President and Chief Executive Officer of TD Bank USA, N.A. Prior to this role, Mr. Neiman served from 1994 to 2006 as Executive Vice President and General Counsel of TD Waterhouse Group. Mr. Neiman began his legal career at the Office of the Comptroller of the Currency serving as Special Assistant to the Chief Counsel.

• Banking Agencies Publish Proposed Basel II Guidance.

On February 28th, the federal bank and thrift agencies published for public comment three documents setting forth proposed supervisory guidance for the Basel II capital standards. Two of the proposals relate to the Basel II advanced approaches for calculating risk-based capital requirements: the advanced internal ratings-based approach for credit risk and the advanced measurement approaches for operational risk. The third proposal provides guidance on the Basel II supervisory review process for assessing capital adequacy. Comments must be submitted by May 29, 2007. 72 FR 9084.

• Proposed Joint Statement on Subprime Mortagage Lending.

On March 2, 2007, the federal financial regulatory agencies issued for comment a proposed Statement on Subprime Mortgage Lending to address certain risks and emerging issues relating to subprime mortgage lending practices, specifically, particular adjustable-rate mortgage (ARM) lending products. The proposed guidance focuses on loans that involve repayment terms that exceed the borrower's ability to service the debt without refinancing or selling the property. The statement specifies that an institution's analysis of a borrower's repayment capacity should include an evaluation of the borrower's ability to repay the debt by its final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule. Press Release.

• OCC Issues Report on New Markets Tax Credits.

On February 27th, the OCC released a Community Developments Insights report entitled, "New Markets Tax Credits: Unlocking Investment Potential," highlighting key features of the New Markets Tax Credit ("NMTC") program and major considerations facing bank investors who use the credits to develop and support community and economic development activities. The Insights report examines the primary risks and regulatory considerations associated with the use of the NMTCs, and discusses strategies and approaches that bank investors have implemented to structure and manage these credits effectively. OCC Press Release.

• OCC Releases January 2007 Bank Accounting Advisory Series.

On February 26th, the OCC released the January 2007 Bank Accounting Advisory Series. Bank Accounting Advisory Series.

• CFTC Issues Amendments to Enforcement Advisory.

On March 1st, the CFTC's Division of Enforcement issued amendments to its 2004 Enforcement Advisory on Cooperation to clarify that the factors contained in the Advisory are meant to encourage strong cooperation among parties in enforcement discussions without eroding the protections of the attorney-client or work product privileges. CFTC Rel.No. 5296-07.

• CFTC Grants No-Action Relief Permitting Withdrawal of CTA Registration.

On March 1st, the CFTC published the February 13, 2007 no-action letter of the Division of Clearing and Intermediary Oversight granting no-action relief to permit a registered commodity trading advisor to withdraw its registration in connection with the provision of commodity interest trading advice to customers who trade wholesale electricity and natural gas. CFTC Letter No. 07-01.

• SEC Implements New Trading Rules.

SEC Regulation NMS's Trading Phase becomes operational on March 5, 2007. As a result, securities exchanges and electronic communication networks will begin complying with the trading phase by implementing policies and procedures to prevent trade throughs. On March 2, Erik R. Sirri, Director of the Division of the Market Regulation at the SEC, in a statement said that the SEC would be monitoring the operation of the equity markets to assess whether problems exist and would work with self-regulatory-organizations regarding problems, and if necessary, implement an industry-wide exception which would suspend operation of all trade-through provisions. Statement.

• Some See Shift in SEC Policy.

On March 1st, the New York Times reported SEC Chairman Christopher Cox has begun to shift agency policy towards a more business-friendly approach. For evidence of that shift the N.Y. Times cited, among other things, the Commission's recent Supreme Court amicus brief in Tellabs, Inc. v. Makor Issues & Rights, Ltd., No. 06-484 (U.S.), in which the SEC argued in favor of a strict interpretation of the PSLRA. The N.Y. Times noted that in an interview of Cox, the Commission Chairman disputed any charge that his commitment to investor protection has waned. Cox's Tenure.

• Fee Rate Advisory.

On March 1st, the SEC announced it has determined that a mid-year adjustment to the Section 31 fee rate for FY 2007 is not required. As a result, the Section 31 fee rate of $15.30 per million dollars that will take effect on March 17 will remain at that level through the end of the fiscal year. The Section 31 assessment on round turn transactions in security futures also will remain at $0.0042 per transaction after March 17. Fee Rate Advisory.

• SEC Seeks Comment on Proposal Requiring SROs to Electronically File Their Proposed Changes.

On February 23rd, the SEC published for comment a new rule which would require all SROs that submit proposed rule changes in accordance with Section 19(b)(7)(A) of the Securities Exchange Act of 1934 to file those rule changes electronically. In addition, the Commission proposed to require SROs to post all such proposed rule changes on their Web sites. Comments must be submitted within 60 days after publication in the Federal Register. Release No. 34-55341.

• NASD Interpretive Material Concerning Trading Ahead to Apply to All OTC Equity Securities.

On February 26th, the SEC granted accelerated approval of a NASD proposed rule change expanding the scope of IM-2110-2, which relates to trading ahead of customer limit orders. The Interpretive Material also known as the "Manning Rule," will apply to all OTC equity securities. Comments must be submitted within 21 days after publication in the Federal Register which is expected during the week of March 5. Release No. 34-55351.

• NASDAQ Lowers Certain Transaction Pricing.

On March 1st, NASDAQ Stock Market announced lower transaction pricing for the top tiers for removing liquidity in all securities and for routing all securities, excluding non-ETFs routed to the NYSE. The pricing changes have been filed with the SEC on an immediately effective basis. NASDAQ Press Release.

• NASDAQ Issues Regulatory Alerts Concerning Structured Products.

On February 27th and 28th, NASDAQ issued Regulatory Alerts 2007-013, 2007-014 and 2007-15 concerning special characteristics and risks associated with trading structured products on NASDAQ.

• Proposed Rule Change Concerning Opening Process for Intermarket Sweep Orders Is Immediately Effective.

On February 21st, the SEC granted immediate effectiveness to a proposed rule change filed by The NASDAQ Stock Market clarifying the opening process for intermarket sweep orders on the Nasdaq Market Center. Comments must be submitted by March 20, 2007. Release No. 34-55323.

• NYSE Issues Information Memo Concerning Use of Floor Broker Error Accounts.

As a result of delays in order processing due to the large trading volume on February 27, 2007, on February 28th, the NYSE granted limited relief permitting floor brokers to use their error accounts to execute customer orders that remained unexecuted even though the order was marketable at some point between entry on the floor and the close of trading, or to unwind trades that were the subject of a valid cancellation. NYSE Information Memo 07-20.

• NYSE Proposes Amendment to Rule Relating to Trading Licenses.

On February 26th, the SEC provided notice of a proposed rule change filed by NYSE regarding the amendment of NYSE Rule 300 relating to trading licenses. Comments must be submitted within 21 days after publication in the Federal Register which is expected during the week of March 5. Release No. 34-55345.

• NYSE Proposes Fee for Real-Time Trade Data.

On February 26th, the SEC provided notice of a proposed rule changed filed by NYSE relating to approval of a fee for NYSE Real-Time Trade Prices. Comments must be submitted within 21 days after publication in the Federal Register which is expected during the week of March 5. Release No. 34-55354.

• SEC Approves Changes to Two NYSE Rules.

On February 23rd, the SEC granted approval to a proposed rule change, as modified, filed by the NYSE relating to NYSE Rule 116 (Stop Constitutes Guarantee) and NYSE Rule 123B (Exchange Automated Order Routing Systems). Release No. 34-55337.

• NYSE Files Proposal Eliminating Index Calculation Methodology Requirement.

On February 23rd, the SEC provided notice of a proposed rule change filed by NYSE which would amend Section 703.16 of the NYSE Listed Company Manual to eliminate the requirement regarding index calculation methodology. Comments must be submitted within 15 days after publication in the Federal Register which is expected during the week of February 26. Release No. 34-55343.

• Standard Position and Exercise Limit Pilot Extended.

On February 26th, the SEC granted immediate effectiveness to a proposed rule change filed by NYSE Arca extending the standard position and exercise limit pilot program. Comments must be submitted within 21 days after publication in the Federal Register which is expected during the week of March 5. Release No. 34-55347.

• NYSE Arca Proposes Amendments to Certain Listing Standards.

On February 23rd, the SEC provided notice of a proposed rule change filed by NYSE Arca amending its listing standards applicable to Investment Company Units. Comments must be submitted within 15 days after publication in the Federal Register which expected during the week of February 26, 2007. Release No. 34-55339.

• Rule Change Relating to Obvious Errors is Effective.

On February 21st the SEC granted immediate effectiveness to a proposed rule change filed by NYSE Arca relating to obvious errors in options transactions. Comments must be submitted by March 21, 2007. Release No. 34-55330.

• Overton v. Todman & Co., CPAs, P.C., No. 06-2496 (2nd Cir. 2007).

On February 26th, the Second Circuit held that an auditor may incur primary liability under Section 10(b) and Rule 10b-5 when the auditor makes a statement in its certified opinion that is false or misleading when made, subsequently learns or was reckless in not learning that the earlier statement was false and misleading, knows or should know that potential investors are relying on the opinion, yet fails to take reasonable steps to correct or withdraw its opinion and/or the financial statement. Second Circuit Opinion.

• The First Annual Capital Markets Summit: Securing America's Competitiveness.

On Wednesday, March 14, 2007, the Commission on the Regulation of U.S. Capital Markets in the 21st Century, an independent, high-level, bipartisan commission organized by the U.S. Chamber of Commerce, is holding The First Annual Capital Markets Summit: Securing America's Competitiveness. This full-day event will feature the release of the Commission on the Regulation of U.S. Capital Markets in the 21st Century's report and recommendations, as well as a number of keynote speakers including Christopher Cox, Chairman, U.S. Securities and Exchange Commission; Christopher Dodd (D-CT), Chairman, U.S. Senate Committee on Banking, Housing and Urban Affairs; Barney Frank (D-MA), Chairman, Financial Services Committee, U.S. House of Representatives; Mark Olson, Chairman, Public Company Accounting Oversight Board (PCAOB); and Mary Schapiro, Chairman and Chief Executive Officer, National Association of Securities Dealers (NASD). Winston & Strawn Partner Christine Edwards will be the facilitator for the Challenges Confronting the Financial Services Industry Panel discussion. Click here for more information.

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