On April 5, 2012, President Obama signed into law the "Jumpstart Our Business Startups" Act (the "JOBS Act"). As noted in the previous issue of the Financial Services Update, the JOBS Act is a groundbreaking development that has the potential to fundamentally alter securities practice in the U.S. Further, the provisions of the JOBS Act easing the prohibition against "general solicitation" under Rule 506 of Regulation D may have significant impact on investment managers. However, this impact will not be felt by investment managers immediately. While certain of the provisions of the JOBS Act were effective immediately upon their enactment on April 5, such as the increased shareholder threshold under Section 12(g) of the Securities Exchange Act of 1934, several provisions are not effective until the Securities and Exchange Commission (the "SEC") has effected rulemaking. In particular, the SEC has been charged with rulemaking duties with respect to the relaxing of the Rule 506 general solicitation restrictions. The new solicitation rule will allow for general solicitation and advertising for private offerings under Rule 506, so long as all purchasers in the private offering qualify as "accredited investors" in accordance with SEC rules. The new solicitation rule is to be effective on July 4, 2012, which is ninety days after the JOBS Act enactment. July 4 also is the date on which the SEC rulemaking is due. The SEC also has been charged with, among other duties, promulgating rules regarding several of the crowdfunding provisions contained in the new act, issuing guidance regarding "emerging growth companies," and adopting safe harbor provisions with respect to the changes to Section 12(g). In the meantime, the SEC is currently accepting public comments prior to releasing its proposed rules. Persons interested in leaving comments on the SEC's various rulemaking proposals may do so here.

For more information on the JOBS Act, please see our full briefing here.

• Where the SEC Dare not Tread.

On April 12th, Bloomberg reported that if the Securities and Exchange Commission (the "SEC") fails to adopt controversial money market fund reforms (such as allowing a fund's net asset value to float), the Financial Stability Oversight Council ("FSOC") may intervene. FSOC Intervention.

• The Return of FIRREA.

On April 12th, Reuters reported that regulators are turning to the 1980's in their effort to bring cases related to the financial crisis. Using the Financial Institutions Reform, Recover, and Enforcement Act of 1989, enacted after the savings-and-loan crisis, regulators are issuing subpoenas related to mortgage-backed securities. The law has a lower threshold of proof and a longer statute of limitations. FIRREA.

• MF Global Trustee May Sue Executives.

On April 12th, the office of James W. Giddens, the trustee for MF Global, Inc. (MF Global's broker-dealer, "MFGI"), advised that the trustee may assert claims against individuals at MFGI and MF Global Holdings, and against MF Global Holdings itself for, among other things, breach of fiduciary duties owed to both MFGI and its customers, and violations of the segregation requirements of the Commodity Exchange Act. Trustee's Website. See also New York Times.

• Internal Controls.

On April 10th, CFO.com analyzed the impact of recent Congressional testimony concerning MF Global's collapse, and the apparent disappearance of up to $1.6 billion in customer money on the firm's internal controls, or the lack thereof. Internal Controls.

• In Pari Delicto and Ponzi Schemes.

On April 10th, the New York Times discussed the in pari delicto defense in the context of two Ponzi schemes: Thomas Petters' $3.5 billion fraud and Bernie Madoff's $17 billion fraud. In Pari Delicto.

• FDIC Amends Regulation J.

On April 12th, the Federal Reserve Board (the "Board") published amendments to Regulation J ("Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire"). The final rule does the following: (i) eliminates references to "as-of adjustments" consistent with the Board's final amendments to Regulation D to simplify reserves administration; (ii) clarifies that an institution's Administrative Reserve Bank is deemed to have accepted deposit of a check or other item even if the institution sends the item directly to another Federal Reserve Bank; (iii) further clarifies that Regulation J continues to apply to a Fedwire funds transfer even if the funds transfer also meets the definition of "remittance transfer' under the Electronic Fund Transfer Act; and (iv) makes other conforming revisions. The new rule is effective July 12, 2012. 77 FR 21854.

• Federal Reserve Board Chairman Discusses Financial Stability.

On April 9th, Board Chairman Ben Bernanke discussed the Board's efforts to foster financial stability in the traditional banking sector as well as in the shadow banking area. He stressed the need for improved risk-management practices especially with respect to the triparty repo market. Bernanke Remarks.

• OCC Workshop.

The Office of the Comptroller of the Currency will host a workshop for directors of nationally chartered community banks and federal savings associations in Atlanta, Georgia on May 14-16, 2012. The workshop provides practical information that expands bank directors' skills and understanding of issues facing their banks. Entitled, "A Director's Challenge: Mastering the Basics," the workshop is geared primarily to directors of community banks and federal savings associations with assets of less than $5 billion who would like to review the fundamental requirements of their position. OCC Press Release.

• FDIC Advisory Committee on Economic Inclusion to Meet.

The Federal Deposit Insurance Corporation's (the "FDIC") Advisory Committee on Economic Inclusion will meet on April 26, 2012, to discuss expanding access to banking services by underserved populations. 77 FR 21773.

• CFPB Bulletin Regarding Third-Party Service Providers.

On April 13th, the Consumer Financial Protection Bureau (the "CFPB") issued a Bulletin regarding supervised institutions' oversight of their business relationships with service providers. Financial institutions under CFPB supervision may be held responsible for the actions of third-party service providers. CFPB Press Release.

• CFPB Proposes Regulation Z Amendment.

On April 12th, the CFPB proposed amendments to Regulation Z regarding limits on fees that a credit card issuer may require a consumer to pay with respect to an account. Currently, Regulation Z limits fees to 25 percent of the credit limit in effect when the account was opened. Last year, the Board amended the rule to extend this limitation to fees that the consumer must pay prior to opening an account, for example an application fee. The amendment was challenged, and a federal district court enjoined the amendment's effectiveness. The CFPB proposes conforming the rule to the court ruling, explicitly stating that the rule will not apply to fees charged prior to account opening. Comments should be submitted on or before June 11, 2012. CFPB Press Release.

• CFPB Releases Beta Version of Financial Aid Comparison Shopper.

On April 11th, the CFPB launched the beta version of the Financial Aid Comparison Shopper, an interactive, online tool designed to help families plan for the costs of post-secondary education. CFPB Press Release.

• Designations.

On April 10th, the Treasury Department's Office of Foreign Assets Control ("OFAC") announced the designation of Guatemalan national Horst Walter Overdick Mejia, who provides a link in the drug trade between Colombian producers and the Mexican drug cartel Los Zetas, as a specially designated narcotics trafficker. The action prohibits U.S. persons from conducting financial or commercial transactions with this individual and freezes any assets the designee may have under U.S. jurisdiction. Treasury Department April 10 Press Release. On April 12th, the Treasury Department's OFAC announced the designation of Ezio Benjamin Figueroa Vasquez and his son, Hassein Eduardo Figueroa Gomez. The designations prohibit U.S. persons from conducting financial or commercial transactions with these individuals, and freezes any assets the designees may have under U.S. jurisdiction. Treasury Department April 12 Press Release.

• Unblocking Notices.

On April 9th, the Treasury Department's OFAC unblocked the assets of the People's Cooperative Bank, located in Khartoum, Sudan; and Unity Bank, located in Khartoum, Sudan. 77 FR 21154.

• CFPB Considers Additional Mortgage Servicing Requirements.

On April 9th, the CFPB published a fact sheet and outline on new mortgage servicing rules it may propose. The rules would affect mortgage statements and require additional notice provisions for interest rate adjustments, force-place insurance, and foreclosure avoidance. CFPB Press Release.

• Open Meeting.

On April 11th, the Commodity Futures Trading Commission (the "CFTC") announced it will hold an open meeting on April 18, 2012, to consider whether to adopt two final rules: a final rule on further definition of "swap dealer," "security-based swap dealer," "major swap participant," "major security-based swap participant," and "eligible contract participant;" and a final rule on commodity options. CFTC Press Release. See also Bloomberg (SEC and CFTC are considering an $8 billion threshold for swap dealer designation).

• SEC Accepting Comments on JOBS Act Implementation.

On April 11th, the SEC announced it will begin accepting public comments as it prepares to draft rules implementing the Jumpstart Our Business Startups Act (the "JOBS Act"). SEC Press Release.

• High Stakes Litigation.

On April 12th, Bloomberg summarized what is at stake in the SEC's lawsuit against former Fannie Mae CEO Daniel Mudd. Stakes.

• JOBS Act Guidance.

On April 10th, the Division of Corporation Finance provided guidance on the JOBS Act provision concerning the confidential submission of registration statements for review pursuant to new Securities Act Section 6(e). JOBS Act FAQs. The next day, on April 11th, the Division of Corporation Finance provided guidance on the JOBS Act provisions concerning the registration and deregistration of securities. JOBS Act FAQs.

• New Investor Advisory Committee Announced.

On April 9th, the SEC announced the formation of the new "Investor Advisory Committee" required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). Section 911 of the Dodd-Frank Act established this new committee to advise the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace. The Dodd-Frank Act authorizes the committee to submit findings and recommendations for review and consideration by the SEC. SEC Press Release.

• Proposed Amendments Regarding Stock-Option Orders are Approved.

On April 6th, the SEC approved the proposals individually submitted by the Chicago Board Options Exchange and C2 Options Exchange that would adopt definitions of complex order and stock-option order, and provide procedures for electronically executing stock-option orders.

• Firm Element Advisory.

On April 13th, the Financial Industry Regulatory Authority ("FINRA") announced that the Securities Industry/Regulatory Council on Continuing Education has released its Spring 2012 Firm Element Advisory ("FEA"). The FEA identifies regulatory and sales practice topics that firms should consider in their Firm Element training plans. FINRA Regulatory Notice 12-20.

• FINRA Announces New Electronic Process for Submission of Notice and Information Relating to Distributions Subject to SEC Regulation M.

On April 11th, FINRA reminded firms of their notification obligations under FINRA Rules 5190 and 6275(f), and FINRA trade reporting rules relating to distributions that are subject to SEC Regulation M. FINRA also announced a new process for the electronic submission of the notice and information required under the rules. Effective June 4, 2012, firms are required to make submissions under Rule 5190, Rule 6275(f) and applicable trade reporting rules in accordance with the new electronic submission process. Prior to the effective date, FINRA will provide access to the system for testing purposes. FINRA Regulatory Notice 12-19.

• Rule Precluding Industry Arbitration of Collective Action Claims Approved.

On April 9th, the SEC announced it approved FINRA's proposed amendment of Rule 13024 of the Code of Arbitration Procedure for Industry Disputes to preclude collective action claims from being arbitrated. SEC Release No. 34-66774.

• Restatement of Interpretive Notice Concerning Rule G-17 Proposed.

On April 9th, the SEC provided notice of the Municipal Securities Rulemaking Board's ("MSRB") filing of a proposed restatement of an interpretive notice concerning the application of MSRB Rule G-17 (on conduct of municipal securities and municipal advisory activities) to sophisticated municipal market professionals. Because of the relationship between the proposed rule change and FINRA Rule 2111 (on suitability), the MSRB requests that the proposed rule change be made effective on July 9, 2012, which is the date on which FINRA Rule 2111 will become effective. Comments should be submitted on or before May 4, 2012. SEC Release No. 34-66772.

• NOM Pricing Modifications Proposed.

On April 6th, the SEC provided notice of NASDAQ Stock Market's filing of proposed modifications to Chapter XV, entitled "Option Pricing," at Section 2 governing pricing for NASDAQ members using the NASDAQ Options Market ("NOM"), NASDAQ's facility for executing and routing standardized equity and index options. Specifically, NOM proposes to amend the Penny Pilot Options ("Penny Options") Customer Rebates to Add Liquidity and Penny Options Customer Fee for Removing Liquidity. The Exchange also proposes to make other minor amendments to the Section 2. Comments should be submitted on or before May 3, 2012. SEC Release No. 34-66768.

• Amendments to Trading Requirements for Certain Registered Options Traders Proposed.

On April 6th, the SEC provided notice of NASDAQ OMX PHLX's filing of proposed amendments to Exchange Rules 1014 ("Obligations and Restrictions Applicable to Specialists and Registered Options Traders") and 1093 ("Phlx XL Risk Monitor Mechanism, and Options Floor Procedure Advice B-3, Trading Requirements"), to change trading requirements applicable to certain Registered Options Traders trading electronically. The amendments would eliminate unnecessary and outdated potential burdens on certain Exchange market makers arising from their use of electronic orders to trade on the Exchange. Comments should be submitted on or before May 4, 2012. SEC Release No. 34-66767.

• Market Quality Program Proposed.

On April 6th, the SEC provided notice of NASDAQ's filing of a proposal to add new Rule 5950 ("Market Quality Program") to enable market makers that voluntarily commit to and do in fact enhance the market quality (quoted spread and liquidity) of certain securities listed on the Exchange to qualify for a fee credit pursuant to the Exchange's Market Quality Program, and to exempt the Market Quality Program from Rule 2460 ("Payment for Market Making"). Comments should be submitted on or before May 3, 2012. SEC Release No. 34-66765. See also Bloomberg.

• NYSE Euronext Advises of Amendments Concerning Approved Persons.

On April 12th, NYSE Euronext advised New York Stock Exchange and NYSE Amex members that the exchanges have amended their respective rules governing the definition of approved person and the application process for approved persons. The amendments are effective immediately. NYSE Euronext Information Memo 12-10.

• Investment Adviser Performance Compensation - Effective May 22, 2012.

The SEC is adopting amendments to the rule under the Investment Advisers Act of 1940, as amended that permits investment advisers to charge performance-based compensation to "qualified clients." The amendments revise the dollar amount thresholds of the rule's tests that are used to determine whether an individual or company is a qualified client. These rule amendments codify revisions that the SEC recently issued by order that adjust the dollar amount thresholds to account for the effects of inflation. 77 FR 10358.

• Edwards Discusses Executive Compensation at Dominican University.

Christine Edwards, a corporate partner in Winston & Strawn's Chicago office, will speak at the Edward A. Brennan Forum on Corporate Governance on April 18, 2012 in Chicago. This event is sponsored by the Brennan School of Business at Dominican University. Ms. Edwards will present "The $10 Million Question: A Discussion on Executive Compensation." Event.

• Contact Us.

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