With last Friday's closing price of oil coming in at a record high of $140 a barrel, it was an opportune time last week for Congress to hold several high profile hearings on the perceived problem of excess speculation in the energy commodity markets, particularly the oil markets. By some counts, lawmakers have introduced no less than a dozen bills purporting to address the "excessive speculation" issue. The various bills attempt to tackle the issue in a number of different ways, including requiring higher margin to be posted for speculative trading, requiring position limits on speculative trading to be reduced, or requiring increased reporting to the CFTC. Other bills go so far as to allow only U.S. investors to trade on regulated U.S. markets, or to prohibit traders that do not have the ability to accept delivery of the underlying commodity from trading on unregulated over-the-counter markets. In fact, as reported below, one such bill even came to a vote and passed last week: the Energy Markets Emergency Act. This legislation would, somewhat vaguely, direct the CFTC to use its authority, including its emergency powers, to curb excess speculation in the energy commodity markets, using various means at its disposal, including the setting of new position limits. Although the bill falls short of actually imposing any new substantive requirements and instead seems to have been introduced as something of a quick publicity play, the speed with which it was passed is a sign of the times. Opponents of these measures argue that these types of measures would be ineffective to reduce any "speculative excess" in the markets, while others argue more fundamentally that speculation performs an essential function in the markets, and that these measures, if passed, would have unintended adverse effects. One specter of unintended consequences would be that energy trading might shift into even less regulated markets or that traders would move their business outside of the U.S., doing little to reduce market prices and possibly further dampening the U.S. financial sector. It remains to be seen if any of these substantive legislative measures will ever be enacted. However, it is safe to say that the prevailing hope on many Wall Street and Greenwich trading floors is that cooler heads will prevail, even as temperatures and prices at the pump continue to rise this summer.

• House Passes Energy Markets Bill.

On June 26th, the House passed H.R. 6377, the Energy Markets Emergency Act of 2008. Among other things, the bill requires the CFTC to consider speculative position limits and margin requirements in the energy markets.

• Housing Bill Stalled.

On June 26th, the Senate housing bill, which would have allowed certain troubled homeowners to refinance their mortgages, has stalled and will not be addressed until after the July 4th recess. Senate.

• Senator Introduces Energy Speculation Bill.

On June 24th, Senator Byron Dorgan introduced the "End Oil Speculation Act of 2008." The bill would require the CFTC to classify all trades as either "legitimate hedge trading" by commercial producers and purchasers of actual physical petroleum products, or, as "non-legitimate hedge trades." The bill would also increase margin requirements. Dorgan Press Release.

• Former Prosecutors Support Attorney-Client Privilege Bill.

On June 23rd, the New York Times reported that 36 former federal prosecutors have written in support of the Attorney-Client Privilege Protection Act of 2007. The bill would prohibit federal prosecutors and agencies, including the SEC, from requiring companies to produce privileged documents in exchange for leniency. The House has already passed the bill and President Bush is expected to sign it. Privilege.

• OCC Releases Updated Version of Activities Permissible for a National Bank.

On June 27th, the OCC released an updated version of "Activities Permissible for a National Bank, 2007."

• Federal Reserve Board Releases Minutes from Bear Stearns Meetings.

On June 27th, the Federal Reserve Board released its March 14 and 16, 2008 minutes in which it discussed the parameters of JP Morgan Chase & Co.'s acquisition of Bear Stearns. Minutes. See also New York Times (summarizing minutes).

• Federal Reserve and FDIC Vote to Propose Certain Basel II Capital Requirements for Smaller Banks.

On June 26th, the Federal Reserve Board and FDIC voted to issue for public comment proposed rules that would implement certain of the less-complex approaches for calculating risk-based capital requirements that are included in the international Basel II capital accord. The less-complex approaches would be available to banks, bank holding companies, and savings associations not subject to the advanced approaches of Basel II. Federal Reserve Press Release; FDIC Press Release; Draft Proposed Rules.

• Banking Agencies Issue Host State Loan-to-Deposit Ratios.

On June 26th, the Federal Reserve Board, FDIC and the OCC issued the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on June 12, 2007. Joint Press Release.

• FDIC and FSA Sign Memorandum of Understanding.

On June 25th, the FDIC announced it has entered into an information sharing agreement with United Kingdom Financial Services Authority. FDIC Press Release.

• Banking Agencies Release List of Distressed or Underserved Nonmetropolitan Middle-Income Geographies.

On June 23rd, the OCC, the FRB, the FDIC, and the OTS announced the availability of the 2008 list of distressed or underserved nonmetropolitan middle-income geographies in which bank revitalization or stabilization activities will receive Community Reinvestment Act consideration as "community development." The 2008 list incorporates a one-year lag period for geographies that were designated as distressed or underserved in 2007, but were not designated as such in the 2008 release. Geographies subject to the one-year lag period are eligible to receive consideration for community development activities for 12 months following publication of the 2008 list. OCC Bulletin 2008-17.

• Global Markets Advisory Committee to Hold Public Meeting.

On June 26th, the CFTC's Global Markets Advisory Committee announced it will conduct a public meeting on Tuesday, July 15, 2008. The purpose of the meeting is to obtain information on the views of industry and market users concerning direct market access. 73 FR 36302.

• Auditor Attestation Compliance Date for Smaller Companies Extended.

On June 20th, the SEC announced that it has approved a one-year extension of the compliance date for smaller public companies to meet the Section 404(b) auditor attestation requirement of the Sarbanes-Oxley Act. Smaller companies will be required to provide the attestation reports in their annual reports for fiscal years ending on or after December 15, 2009. The SEC also announced that it received Office of Management and Budget approval to proceed with data collection for a study of the costs and benefits of Section 404 implementation, focusing on the consequences for smaller companies and the effects of the Section 404 auditor attestation requirements. The results of the study are expected to become available during the extension period. SEC Release No. 33-8934; SEC Press Release.

• Foreign Broker-Dealers.

On June 27th, the SEC published for comment proposed amendments to Rule 15a-6 under the Securities Exchange Act of 1934. The proposed amendments would liberalize the ability of unregistered foreign broker-dealers to do business with U.S. investors, allowing them to interact with U.S. investors, including natural persons, with $25 million or more in investments without the involvement of a U.S. broker-dealer. Comments should be submitted within 60 days after publication in the Federal Register which is expected during the week of June 30. SEC Release No. 34-58047; SEC Press Release. See also Cox Open Meeting Remarks; Sirri Open Meeting Remarks.

• Indexed Annuities and Certain Other Insurance Contracts.

On June 26th, the SEC proposed for comment a new rule that would define the terms "annuity contract" and "optional annuity contract" under the Securities Act of 1933. The proposed rule would establish the standards for determining when equity indexed annuities may be considered securities subject to the investor protections afforded by the securities laws. The Commission also proposed to exempt insurance companies from filing reports under the Securities Exchange Act of 1934 with respect to indexed annuities and other securities that are registered under the Securities Act, provided that the securities are regulated under state insurance law, the issuing insurance company and its financial condition are subject to supervision and examination by a state insurance regulator, and the securities are not publicly traded. Comments should be submitted on or before September 10, 2008. SEC Release No. 33-8933; SEC Press Release. See also Cox Open Meeting Remarks.

• Revised Oil and Gas Reporting Requirements.

On June 26th, the SEC proposed for comment revisions to its oil and gas reporting requirements in Regulation S-K and Regulation S-X under the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as Industry Guide 2. The revisions are intended to provide investors with a more meaningful and comprehensive understanding of oil and gas reserves. The proposed amendments would also codify Industry Guide 2 in Regulation S-K, with several additions to, and deletions of, current Industry Guide items. They would further harmonize oil and gas disclosures by foreign private issuers with the proposed disclosures for domestic issuers. Comments should be submitted within 60 days after publication in the Federal Register which is expected during the week of June 30. SEC Release No. 33-8935; SEC Press Release.

• Credit Rating Agencies.

On June 25th, Reuters reported the SEC has voted to propose rules whose effect would limit the role of credit rating agencies. Vote. In his Open Meeting remarks concerning the proposed rules, Chairman Christopher Cox summarized the staff's recommendations. SEC staff suggests the complete elimination of any reference to credit ratings in 11 rules and forms, the substitution of a standard based on a more clearly stated regulatory purpose or other concept in 27 rules and forms and recommending that references be left unchanged in 6 rules and forms. Cox Open Meeting Remarks. Andrew J. Donohue, SEC Director, Division of Investment Management, summarized the investment company rules which would be affected by the proposed rule changes. Steven Hearne, SEC Special Counsel, Division of Corporation Finance, explained the proposed amendments to the Securities Act and the Securities Exchange Act and their respective forms and regulations. Erik R. Sirri, SEC Director, Division of Trading and Markets, noted the proposed changes to net capital rules.

• SRO Rulemaking Process.

On June 25th, the SEC voted to propose rule amendments streamlining the manner in which exchanges and self-regulatory organizations submit changes for Commission approval. Among other things, the proposed rule amendments would require submissions to be published within 15 business days. SEC staff also recommended the issuance of new interpretive guidance regarding submissions that may be filed for immediate effectiveness. See Cox Open Meeting Remarks; Sirri Open Meeting Remarks.

• Senate Banking Committee Approves SEC Nominees.

On June 26th, CFO.com reported that the Senate Banking Committee has approved President Bush's three nominations to the SEC, Troy Paredes, Luis Aguilar and Elisse Walter. The nominations now go to the full Senate where confirmation is expected. Confirmation. On June 20th, Reuters reported the written responses filed by the three SEC nominees in response to follow-up questions posed by members of the Senate Banking Committee. The nominees support additional regulation of investment banks if necessary. Responses.

• SEC Announces "21st Century Disclosure Initiative."

On June 24th, the SEC announced it will examine the way it acquires information from public companies, mutual funds, brokers, and other regulated entities, and the way it makes that information available to investors and the markets. The aim of the internal inquiry will be to outline a disclosure system that incorporates technology, the new ways in which investors get their information, and recent developments in how companies compile and report the information in their SEC-mandated disclosures. The study, known as the "21st Century Disclosure Initiative" will be led by Dr. William D. Lutz of Rutgers University. SEC Press Release.

• Profile of L.A. Regional Director.

On June 22nd, the Los Angeles Times profiled Rosalind R. Tyson, the newly appointed Regional Director of the SEC's Los Angeles Regional Office. Profile.

• SEC to Host Roundtable Discussion on Fair Value Accounting.

On June 20th, the SEC announced it will host a roundtable on July 9, 2008, to facilitate an open discussion of the benefits and potential challenges associated with existing fair value accounting and auditing standards. SEC Press Release.

• CBOE Proposes to List and Trade Option on Index-Linked Securities.

On June 24th, the SEC provided notice of the Chicago Board Options Exchange's proposal to amend CBOE Rules 5.3 and 5.4 to enable the listing and trading on the Exchange of options on Index-Linked Securities. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of June 30. SEC Release No. 34-58007.

• CBOE Proposes Changes to Hybrid Opening System.

On June 20th, the SEC provided notice of the Chicago Board Options Exchange's proposal to amend CBOE Rule 6.2B (Hybrid Opening System) to permit Hybrid Agency Liaison functionality to be available on the openings in designated classes. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of June 30. SEC Release No. 34-57997.

• CBOE Proposes to Amend Obligations of Market Makers.

On June 20th, the SEC provided notice of the Chicago Board Options Exchange's proposal to amend CBOE Rule 8.7 (Obligations of Market Makers), to clarify that the in-person requirements in CBOE 8.7.03B may be satisfied by market-makers individually or collectively with market-makers of the same member organization. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of June 30. SEC Release No. 34-57996.

• FINRA Consolidates the Collection and Processing of Regulation T and SEC Rule 15c3-3 Extension of Time Requests.

On June 23rd, the Financial Industry Regulatory Authority announced it integration of the legacy NYSE Regulation and NASD extension of time processing systems into one combined system. Effective November 17, 2008, all requests for an extension of time must be filed through the new system, known as the "Reg T" system, which is accessible through FINRA's Firm Gateway. FINRA Regulatory Notice 08-32.

• FINRA Proposes Real-Time Transaction Reporting for Foreign Equity Securities.

On June 18th, the SEC published notice of a proposed change to FINRA Rule 6620 that would require over-the-counter transactions in foreign equity securities, executed between 8 a.m. and 8 p.m. Eastern Time, to be reported within 90 seconds of execution. Currently, OTC transactions in U.S. equity securities, Canadian securities and ADRs must be reported within 90 seconds; however, transactions in foreign equity securities may be reported by 1:30 pm Eastern Time on the following business day. Consequently, these trades are not publicly disseminated in the same manner as securities required to be reported within 90 seconds. Reporting exemptions for transactions in foreign equity securities executed over-the-counter in a foreign country and reported to that country's securities regulator, and for transactions executed on and reported to a foreign securities exchange, will remain. 90 second reporting also will result in foreign equity securities transactions being subject to FINRA's regulatory transaction fee. Comments should be submitted on or before July 17, 2008. Release No. 34-57986.

• SEC Approves Rule Change Requiring Underwriter Registration and Testing with Depository Trust and Clearing Corporation.

On June 25th, the SEC approved the Municipal Securities Rulemaking Board's proposal to require underwriters to register and conduct tests with the Depository Trust and Clearing Corporation's New Issue Information Dissemination System. The proposed rule change will help ensure that dealers are prepared for the September 30, 2008, effective date of changes to other MSRB rules to require underwriters to participate in the New Issue Information Dissemination System. SEC Release No. 34-58016.

• NASDAQ Warns on Behavior that May Cause Regulatory Scrutiny.

On June 25th, the NASDAQ Stock Market issued a regulatory alert advising members that certain behavior on June 27, 2008, the Russell Rebalance Day, may be referred to the Financial Industry Regulatory Authority for investigation. NASDAQ Regulatory Alert 2008-012.

• NFA Issues Notice Regarding the Submission of Revised Disclosure Documents.

On June 20th, the National Futures Association announced that in order to increase the efficiency of NFA's Disclosure Document review process, as of July 1, 2008, NFA is requiring that, in addition to submitting the revised disclosure document for acceptance, members must also submit a copy of the document that identifies all deletions and additions from the previous version. NFA Notice I-08-17.

• NYSE Regulation Issues Information Memo on Report Card Compliance.

On June 25th, NYSE Regulation issued an information memo advising that the Division of Market Surveillance will be implementing a systematic release of Report Cards relating to NYSE Rule 123(e) and (f), which require floor members to submit order information in the NYSE Front End System Capture ("FESC") database before the orders are represented on the Floor, and in conjunction with NYSE Rule 130(c) and (c)(ii), which require that transactions executed on the NYSE be compared or closed out by the day following execution, and that each party to the transaction submit trade data to an NYSE facility. The Report Cards will be available on a monthly basis and will consist of a report of potential violations related to order entries and reports of execution. NYSE Regulation Information Memo 08-31.

• Accelerated Approval Granted to Proposal to Trade Certain Options on Reduced Values.

On June 24th, the SEC granted accelerated approval to NYSE Arca's proposed amendment of certain Exchange rules to allow for the trading of options on reduced values of the FTSE 100 Index and the FTSE 250 Index. The Exchange also proposes to list and trade long-term options on reduced values of the FTSE 100 Index and the FTSE 250 Index. Options on these indexes will be AM cash-settled and will have European-style exercise provisions. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of June 30. SEC Release No. 34-58008.

• Accelerated Approval Granted to Proposed Clearing and Settling of Range Options.

On June 23rd, the SEC granted accelerated approval to the Options Clearing Corporation's proposal to clear and settle range options. Comments should be submitted within 21 days after publication in the Federal Register which is expected during the week of June 30. SEC Release No. 34-58003.

• SEC Grants Realpoint's Application for Registration as a NRSRO.

On June 23rd, the SEC granted Realpoint LLC's application for registration as a nationally recognized statistical rating organization. SEC Release No. 34-58000. See also SEC Release No. 34-58001 (temporary exemption from conflicts of interest prohibition). On June 24th, CFO.com reported Realpoint will be the only NRSRO specializing in structured financings. CFO.com.

• Court Holds Plaintiff Adequately Pleaded Securities Fraud.

On June 27th the D.C. Circuit, affirming in part and reversing in part, held that plaintiffs adequately pleaded claims for securities fraud and civil fraud. A jury could find that defendants made misleading statements or omissions and that plaintiff reasonably relied upon those statements. Media General, Inc. v. Tomlin.

• Court Addresses Scienter Pleading.

On June 26th, the Second Circuit held that although a securities fraud plaintiff may plead the requisite scienter against a corporate defendant without successfully pleading scienter against a specific individual defendant, the plaintiff here failed to do so. Teamsters Local 445 Freight Division Pension Fund v. Dynex Capital Inc.

• Eleventh Circuit Holds CEA Gives Courts Authority to Order Restitution.

On June 26th, the Eleventh Circuit held that the Commodity Exchange Act gives courts the authority to order restitution. However, in the instant case the district court abused its discretion in awarding restitution in the amount of customer losses. The proper measurement is the amount of defendants' unjust enrichment. The Court therefore vacated the restitution award and remanded for further proceedings. The district court's injunction and award of civil penalties were affirmed. CFTC v. Wilshire Investment Management Corp.

• Court Holds Audit Firm Did Not Owe Duty of Care to Third Party.

On June 25th, the Fourth Circuit, reversing the trial court, held that defendant accounting firm hired by a bank in response to an investigation conducted by the Office of the Comptroller of the Currency did not owe a state law duty of care to plaintiff who, relying on defendant's alleged statements concerning the bank's condition, accepted a job offer from the bank. Ellis v. Grant Thornton, LLP.

• Convictions of Former Hollinger International Executives Affirmed.

On June 25th, the Seventh Circuit affirmed the convictions of Conrad M. Black, Peter Y. Atkinson, John A. Boultbee and Mark S. Kipnis, former executives of Hollinger International, on charges of fraud, honest services fraud and in the case of Black, obstruction of justice. U.S. v. Black.

• Rule Amends Definition of Eligible Portfolio Company under the Investment Company Act of 1940 - Effective July 21, 2008.

On May 15th, the SEC published an amendment to a rule under the Investment Company Act of 1940 to more closely align the definition of eligible portfolio company, and the investment activities of business development companies, with the purpose that Congress intended. The amendment expands the definition of eligible portfolio company to include certain companies that list their securities on a national securities exchange. Federal Register pp. 29044-29052.

• Electronic Filing and Revision of Form D - Effective September 15, 2008.

On February 6, the SEC published notice of amendments to rules mandating the electronic filing of information and revisions to Form D and to Regulation D in connection with the electronic filing requirement. According to the SEC, the revisions simplify and restructure Form D and update and revise its information requirements. Federal Register pp. 10591-10642.

• Second Circuit Denies Voting Injunction and Grants Expedited Appeal in CSX 13(d) Case.

On June 20th, Winston & Strawn published a Briefing discussing the recent decision by the U.S. District Court for the Southern District of New York, applying Securities Exchange Act Section 13(d) beneficial ownership standards to holders of certain equity swaps. Briefing. On June 25th, Winston & Strawn published a follow-up Briefing discussing the Second Circuit Court of Appeals' order denying plaintiff CSX's request for an injunction against the voting of defendants' shares, and granting expedited appeal that calls for briefing of the issues in July and argument to be held at the beginning of August. Follow-up Briefing.

• FRB Proposes Additional Changes to Regulation Z.

The Federal Reserve issued additional proposed amendments to Regulation Z that supplement its proposed broad revisions to the rule that it issued last year and co-ordinate with its proposal concerning unfair or deceptive acts and practices. This briefing summarizes the principal changes that would be made under the proposed rule. Follow-up Briefing.

• Winston & Strawn Hosts Private Equity and Hedge Funds Seminar on Fair Value Measurements.

Winston & Strawn will host a seminar titled What Private Equity and Hedge Funds Need to Know About FAS 157 "Fair Value Measurements" in the firm's Chicago office on Wednesday, July 16, 2008 at 4 p.m. The event will be co-hosted by PricewaterhouseCoopers LLP. Event Information.

• Michael O'Brien Discusses Credit Default Swaps on PLI Teleconference.

Winston & Strawn financial services partner Michael O'Brien, who is based in the Chicago office, will speak on a Practising Law Institute audio briefing titled "Credit Default Swaps - A Critical Primer" to be held July 23, 2008 at 1 p.m. (Eastern). Event Information.

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