The beltway is back from holiday vacation and the regulatory machine is starting to move forward (or, depending on your perspective, backward). The FDIC was particularly active, adopting interim rules to implement various changes in the Financial Services Regulatory Relief Act of 2006 and the Federal Deposit Insurance Reform Act of 2005, and publishing proposed rules related to data maintenance by large insured institutions and related practices by the FDIC in the event of a failure. The SEC approved an amendment to NYSE rules to provide for "liquidity replenishment points" that, when triggered, converts the market to auction pricing. The SEC also allowed the American and Philadelphia Stock Exchanges to make permanent their $1 Strike Pilot Programs, and approved the proposal from the NYSE Arca to change the time at which options on certain ETFs cease trading to match the close of trading for the underlying ETF.

• SEC Accounting Staff Will Not Object to Home Loan Restructurings.

SEC accounting staff will not object to proposed plans that will allow lenders to restructure home mortgages which are part of larger securitization packages provided sufficient disclosure is made to investors. Loan Modifications. On January 11th, the New York Times reported on the efforts of the Mortgage Bankers Association to have a different accounting rule, Financial Accounting Standard 114, relaxed. Request.

• IASB Reviewing SIV Accounting Issues.

On January 8th, Reuters reported the International Accounting Standards Board is reviewing off-balance sheet investment vehicles and plans to issue a discussion paper on the topic later this year. IASB.

• FDIC Adopts Interim Rules to Implement Statutory Changes.

FDIC released interim rules that are effective on January 14, 2008 to implement statutory changes made by the Financial Services Regulatory Relief Act of 2006 and the Federal Deposit Insurance Reform Act of 2005. The deadline for comments on the interim rules is March 14, 2008. The amendments (i) clarify that a deposit insurance application is required for each new bank that results from the conversion of certain federal savings associations into multiple banks; (ii) define the term "corporate reorganization" in the merger regulations to mean a merger that involves solely an insured depository institution and one or more of its affiliates; (iii) remove from the merger regulations any reference to "Optional Conversions"; (iv) add unfavorable future prospects of an institution proposed for acquisition as grounds for disapproval of a change in control notice; and (v) broaden the permitted disclosure of examination reports and other supervisory information. 12 CFR Parts 303, 308 and 309.

• FDIC Requests Comment on Rules Related to Bank Resolutions.

On January 14th, FDIC published in the Federal Register a request for comment on proposed rules that would require large insured institutions to maintain data and establish mechanisms to facilitate the ability of FDIC to determine deposit insurance coverage in the event of a failure. In addition, the proposal would establish FDIC's practice for determining deposit account balances in the event of a failure. Comments should be submitted by April 14, 2008. 12 CFR Part 360.

• FDIC Outlines Case for Streamlined Loan Modifications.

On January 10th, the FDIC released "FDIC Quarterly," which includes an outline of the analytical case for a systematic and streamlined loan modification process that will help avert foreclosure for borrowers who are current on their loans, but who cannot refinance or afford the higher payments when interest rates reset. FDIC Press Release; FDIC Quarterly.

• OCC Releases Annual Report.

On January 10th, the OCC released its Fiscal Year 2007 Annual Report. Accompanying discussions of the OCC, its finances, and its financial management are sections on the agency's national and international supervisory activities in 2007, as well as sections on the importance of community banking and consumer protection to the national banking system.

• FinCEN Eliminates AML Exemption for Two Categories of Institutions.

On January 11th, the Financial Crimes Enforcement Network amended its regulations to reflect that the exemptions for dealers in precious metals, stones, or jewels and insurance companies from having to establish anti-money laundering programs are no longer effective because those companies have since been required to establish AML programs. The amendments were effective January 11, 2008. 73 FR 1975.

• Treasury Department Designates Five for Fueling Iraqi Insurgency.

On January 9th, the Treasury Department designated four individuals and one entity under Executive Order 13438 for threatening the peace and stability of Iraq and the Government of Iraq. E.O. 13438 prohibits all transactions between the designees and any U.S. person and freezes any assets the designees may have under U.S. jurisdiction. Treasury Department Press Release.

• FinCEN Issues Rulings Regarding Money Services Business.

On January 8th, the Financial Crimes Enforcement Network published a letter ruling on whether a publicly traded company that cashes its own checks issued to loan customers is a money services business. The letter ruling provides, "if you are only cashing a given loan check for the customer who is obtaining the loan, and not for a third party, then you are in effect disbursing loan proceeds in cash. In that case, you would not be a check casher as defined in our regulations." FinCEN Letter Ruling 2007-R001. On January 10th, FinCEN published a letter ruling on whether a business that cashes checks payable to customers to apply proceeds to the repayment of customers' obligations is a money services business. The letter ruling concluded that the business did not need to register as a money service business because the business will not cash any checks or monetary instruments of any kind for any person in an amount greater than $1,000 per person per day, with two exceptions. The first exception is for the business's employees' payroll checks. The second exception is for checks or money orders payable to customers who have current obligations to the business that are due and payable, if the difference between the amount of the check or money order and the amount that the customer will pay to the business to satisfy current obligations is less than $1,000. FinCEN Letter Ruling 2007-R002.

• SEC Chairman Discusses XBRL and IFRS.

On January 11th, Reuters reported the remarks of SEC Chairman Christopher Cox at an AICPA conference, in which, noting the convergence of global markets, he stressed the importance of a common language for financial reports. Among other things, Cox discussed the benefits of XBRL (a machine-readable computer program that stands for eXtensible business reporting language and its reputed to improve the usability of financial reports, and increase data quality, as well as speed the time to publishing.) Cox stated that the Commission will conduct a cost-benefit analysis of XBRL before deciding whether to require companies to use it in their filings. Cox Remarks. CFO.com reported the SEC Chairman also defended the agency's acceptance of international financial reporting standards, or IFRS. IFRS Defense.

• XBRL Skeptics.

On January 7th, CFO.com reported on the criticism XBRL skeptics have voiced. XBRL.

• $1 Strike Pilot Program Expanded and Made Permanent.

On January 8th, the SEC granted accelerated approval to the individual requests of the American and Philadelphia Stock Exchanges to expand their respective $1 Strike Pilot Programs and to make the programs permanent. SEC Release No. 34-57110; SEC Release No. 34-57111.

• FINRA Eliminates General Securities Principal Examination Requirement.

On January 11th, FINRA advised that it has amended NYSE Rule 342.13 to eliminate the requirement that the General Securities Principal Examination (Series 24) be passed after July 1, 2001, in order to be recognized as an acceptable alternative to the General Securities Sales Supervisor Qualification Examination (Series 9/10) for persons whose duties do not include supervision of options or municipal securities sales activities. FINRA Regulatory Notice 08-02.

• FINRA Releases Webcast on AML Examinations.

On January 8th, FINRA released a webcast on what firms should expect from the Anti-Money Laundering reviews conducted as part of FINRA's routine examinations. View AML Webcast at FINRA Home Page.

• New Rate for Fees Paid under Section 31 of the Exchange Act.

On January 8th, FINRA issued an information notice advising that effective January 25, 2008, the Securities Exchange Act Section 31 rate applicable to securities transactions will decrease from $15.30 per million to $11.00 per million dollars. FINRA Information Notice.

• Amendment Allowing ISE to List Up to Seven Expiration Months Is Immediately Effective.

On January 4th, the SEC granted immediate effectiveness to the International Securities Exchange's proposed amendment of Rule 2009(a)(3) (Terms of Index Option Contracts) to allow the Exchange to list up to seven expiration months for broad-based security index options upon which an exchange calculates a constant three-month volatility index. Comments should be submitted on or before February 1, 2008. SEC Release No. 34-57104.

• Filing Deadline for CPOs Who Did Not Operate a Commodity Pool.

On January 10th, the National Futures Association reminded CPOs that in lieu of filing an Annual Report, they must notify NFA by January 30, 2008 if they did not operate a commodity pool during calendar year 2007. NFA Notice I-08-02.

• NYSE Amends Rule 1000 (Automatic Execution of Limit Orders Against Orders Reflected in NYSE Published Quotation).

On December 28, 2007, the SEC published a notice of filing and immediate effectiveness of a New York Stock Exchange proposal to amend NYSE Rule 1000(a)(iv) to provide for Liquidity Replenishment Points ("LRPs") (pre-determined price points that function as "speed bumps" to moderate volatility in a security, improve price continuity, and foster market quality by temporarily converting the electronic market to an auction market and permitting new orders, the trading crowd and the specialist to add liquidity), to be calculated based on the last published quote rather than the last sale price when a stock opens on a quote or upon resumption of Auto Execution after it was disabled due to quoting beyond the LRP. Comments should be submitted on or before January 28, 2008. Release No. 34-57063.

• Proposed Change To Time That Certain ETF Options Cease Trading Is Immediately Effective.

On January 2nd, the SEC granted immediate effectiveness to NYSE Arca's proposed amendment of NYSE Arca Rule 7.1, changing the time at which certain options on exchange-traded funds ("ETFs") cease trading on the Exchange from 4:15 p.m. Eastern/1:15 p.m. Pacific to the time that trading closes in the core trading session of the primary listing exchange for the underlying ETF. Comments should be submitted on or before January 30, 2008. SEC Release No. 34-57087.

• Court Dismisses Bond Underwriters' Appeal of SEC Order.

On January 11th, the D.C. Circuit dismissed bond underwriters' petition for review of a SEC order holding them liable for securities law violations in connection with a municipal bond offering. The Court found that the Commission's scienter findings were supported by substantial evidence. Even though petitioners made cautionary statements, they "were so deficient [petitioners] must have known investors would be misled by the offering documents." Cautionary words about future risk cannot insulate from liability the failure to disclose that the risk had already occurred. Petitioners' lack of perfect knowledge did not relieve them of the duty to disclose what they did know and although the information was technically in the public domain, it was not reasonably available to investors. Underwriters have a heightened obligation to insure adequate disclosure which does not disappear even if investors are sophisticated. The Court further found that substantial evidence supported the Commission's conclusion that petitioners could not rely on the silence of others to absolve themselves of responsibility when non-disclosure presented such an obvious danger of misleading investors. Dolphin and Bradbury, Inc. v. SEC.

• Court Holds CFTC Lacks Jurisdiction over Certain Foreign Currency Transactions.

On January 9th, the Sixth Circuit held that the foreign currency transactions at issue were not futures contracts subject to CFTC jurisdiction. Unlike futures contracts, the foreign currency transactions at issue differed in price, amount and settlement date and were not traded on an exchange. CFTC v. Erskine.

• Revisions to the Eligibility Requirements for Primary Securities Offerings on Forms S-3 and F-3 - Effective January 28, 2008.

On December 19, 2007, the SEC published amendments to the eligibility requirements of Form S-3 and Form F-3 to allow certain domestic and foreign private issuers to conduct primary securities offerings on these forms without regard to the size of their public float or the rating of debt they are offering, so long as they satisfy the other eligibility conditions of the respective form, have a class of common equity securities listed and registered on a national securities exchange, and the issuers do not sell more than the equivalent of one third of their public float in primary offerings over any period of 12 calendar months. The amendments are intended to allow more companies to benefit from the greater flexibility and efficiency in accessing the public securities markets afforded by Form S-3 and Form F-3 without compromising investor protection. In addition, the SEC is amending Securities Act regulations to clarify that violations of the one-third restriction will also violate the requirements as to proper registration form, even though the registration statement has been declared effective previously. SEC Release 33-8878. Published in the Federal Register December 27, 2007. Federal Register pp. 73534-73552.

• Revisions to Rules 144 and 145 - Effective February 15, 2008.

On December 6, 2007, the SEC published amendments to Rules 144 and 145 under the Securities Act of 1933. Please see the December 2007 Winston & Strawn LLP Briefing "SEC Adopts Significant Changes to Rules 144 and 145," Federal Register pp. 71546-71573.

• Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards Without Reconciliation to U.S. GAAP - Effective March 4, 2008.

On December 21, 2007 the SEC published new rules to accept from foreign private issuers in their filings with the Commission financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") without reconciliation to generally accepted accounting principles ("GAAP") as used in the United States. To implement this, the SEC is adopting amendments to Form 20-F, conforming changes to Regulation S-X, and conforming amendments to other regulations, forms and rules under the Securities Act and the Securities Exchange Act. Current requirements regarding the reconciliation to U.S. GAAP do not change for a foreign private issuer that files its financial statements with the Commission using a basis of accounting other than IFRS as issued by the IASB. Published in the Federal Register January 4, 2008. Federal Register pp. 986-1012.

• Winston & Strawn LLP Expands into Charlotte.

Winston & Strawn LLP opened a major office in Charlotte and significantly expanded its corporate finance capabilities with the addition of six partners who previously practiced in the lending and corporate finance group of Kennedy Covington Lobdell & Hickman. The law firm's tenth office will be headed by Dean A. Warren. View Briefing.

• Winston & Strawn LLP's International Arbitration Practice Earns Top 30 Ranking.

Winston & Strawn's international arbitration practice earned a top spot among global law firms serving as arbitration counsel as ranked by The Global Arbitration Review in its "GAR 30" survey. The "GAR 30" firms are selected based on a composite of their scores in three key categories - reputation, work, and experience. Winston's 28 pending matters with a value of US$5.4 billion contributed to the firm's inclusion on this list of elite international arbitration firms. View Briefing.

• Recent Winston & Strawn Client Briefings.

Credit Roundtable Proposals to Improve Covenant Protections in the Investment Grade Bond Market; January 10, 2008. View Briefing.