• Corporate Political Spending.

Lucian Bebchuk of Harvard Law School and Robert J. Jackson, Jr. of Columbia Law School blogged about the SEC's plans to propose by April, rules requiring companies to disclose their political spending. The bloggers, writing for the Harvard Law School Forum on Corporate Governance and Financial Regulation, co-chaired the committee that petitioned the SEC to consider such rules. The Case for Disclosure. Corporate Counsel summarized two bills in Congress which would require corporate disclosure of campaign contributions. It noted the bills' supporters and the connection between political contributions and Congressional filibusters. Congressional Response.

• Board Responsibilities.

The Hill's Congress Blog discussed the dilemma AIG's board recently confronted: whether to join former CEO Hank Greenberg's lawsuit against the federal government over the AIG bailout. John Alan James, a business school professor at Pace University, noted that if AIG shareholders believe they received inadequate value from the bailout they should sue the AIG board which approved the agreement, not the government which saved the company. AIG's Board. Turning to more typical issues facing corporate boards, Accounting Today summarized a report conducted by KPMG on the challenges facing board audit committees. While financial reporting and internal controls continue to be priorities, KPMG counsels audit committees to clearly communicate their expectations to outside auditors. Communications.

• Pay for Performance.

The Harvard Law School Forum on Corporate Governance and Financial Regulation posted Matteo Tonello's blog on designing the proper executive compensation plan. Tonello uses GE as a case study to assist director understanding of pay-for-performance issues. P4P Case Study. Noam Noked, co-editor of the HLS Forum on Corporate Governance addressed a more fundamental issue related to pay for performance: defining what exactly "pay" is. Defining Pay.

• Bar Association's Corporate Governance Chair's Take on Corporate Governance.

Corporate Counsel excerpted its interview with John Stout, the Chairman of the American Bar Association's corporate governance committee. The interview discussed executive compensation, staggered boards, and the growing importance of information technology and cybersecurity. Interview.

• Regulatory Agendas.

On January 8th, the Federal Reserve Board and the FDIC published their respective regulatory agendas. FRB Agenda; FDIC Agenda.

• OCC Bulletin on Lending Limits.

On January 4th, the OCC issued a bulletin on its final rule that extends from January 1, 2013 to July 1, 2013 the temporary exception for the application of its lending limits rule, 12 C.F.R. 32, to certain credit exposures arising from derivative transactions and securities financing transactions.

• CFPB Publishes Home Mortgage Rules.

On January 10th, the Consumer Financial Protection Bureau issued new rules governing home mortgages. The Ability-to-Repay and Qualified Mortgage Standards under the Truth in Lending Act rules implement Dodd-Frank Act provisions requiring mortgage lenders to consider consumers' ability to repay home loans before extending them credit. The rule will take effect on January 10, 2014. The rule also requests comment on whether to adjust the final rule for certain community-based lenders, housing stabilization programs, certain refinancing programs of Fannie Mae or Freddie Mac and Federal agencies, and small portfolio creditors. The Bureau expects to finalize the concurrent proposal this spring so that affected creditors can prepare for the January 2014 effective date. Ability-to-Repay Rule; CFPB Press Release on Ability-to Repay and Qualified Mortgages (with links to fact sheet and summary). The CFPB also issued final rules amending Regulation Z to implement statutory changes made by the Dodd-Frank Act that lengthen the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. The rule also exempts certain transactions from the statute's escrow requirement. The primary exemption applies to mortgage transactions extended by creditors that operate predominantly in rural or underserved areas, originate a limited number of first-lien covered transactions, have assets below a certain threshold, and do not maintain escrow accounts on mortgage obligations they currently service. The amendments are effective June 1, 2013. Escrow Amendments. The last set of rules expand the types of mortgage loans subject to the protections of the Home Ownership and Equity Protections Act of 1994 ("HOEPA"), revise and expand the tests for coverage under HOEPA, and impose additional restrictions on mortgages that are covered by HOEPA, including a pre-loan counseling requirement. This rule also amends Regulation Z and Regulation X (Real Estate Settlement Procedures Act) by imposing certain other requirements related to homeownership counseling, including a requirement that consumers receive information about homeownership counseling providers. The rule is effective January 10, 2014. HOEPA Amendments. CFPB Press Release on Escrow Accounts and HOEPA (with links to consumer guides)

• CFPB Agenda.

On January 8th, the Consumer Financial Protection Bureau published its regulatory agenda for 2013.

• OFAC Advisory on Iran.

On January 10th, the Treasury Department's Office of Foreign Assets Control issued an Advisory on Iran's increasing use of third-party exchange houses and trading companies to evade U.S. sanctions. OFAC Notice.

• OFAC Designations.

On January 9th, the Treasury Department's Office of Foreign Assets Control announced the designation of two Sinaloa Cartel operatives, including a senior lieutenant of the cartel and the father-in-law of Sinaloa drug lord Joaquin "Chapo" Guzman Loera. The action, pursuant to the Foreign Narcotics Kingpin Designation Act, prohibits U.S. persons from conducting financial or commercial transactions with these two individuals, and also freezes any assets they may have under U.S. jurisdiction. OFAC designated Damaso Lopez Nunez for his role in the narcotics trafficking activities of Joaquin "Chapo" Guzman Loera and for playing a significant role in international narcotics trafficking. OFAC designated Ines Coronel Barreras for his role in the narcotics trafficking activities of Guzman Loera. Treasury Department Press Release.

• OFAC Unblocking Notices.

On January 9th, the Treasury Department's Office of Foreign Assets Control removed the names of 1 individual and 1 entity whose property and interests in property were blocked pursuant to Executive Order 13315, "Blocking Property of the Former Iraqi Regime, Its Senior Officials and Their Family Members, and Taking Certain Other Actions," from the list of Specially Designated Nationals and Blocked Persons.

• Customer Identification Program Relief.

On January 11th, Division of Trading and Markets staff extended for two years previously granted no-action relief concerning Rule 17a-8 under the Securities Exchange Act of 1934. The Division will not recommend enforcement action if a broker-dealer relies on a registered investment adviser to perform some or all of its customer identification program obligations. No-Action Relief.

• Second Look at Physical Copper ETF Sought.

On January 10th, Reuters reported a consortium of copper fabricators has written the SEC asking it to reconsider its approval of JP Morgan's physical copper ETF. Reconsideration.

• Regulatory Agenda.

On January 8th, the SEC published its regulatory agenda.

• Supreme Court Skeptical of SEC's Statute of Limitations Claims.

On January 8th, the Washington Post summarized oral arguments before the U.S. Supreme Court. In SEC v Gabelli, the Court is considering when the SEC's market timing enforcement action against two mutual fund executives accrued. At issue is whether the "discovery rule," which delays accrual of a cause of action until the plaintiff has "discovered" it, applies to the civil penalties statute of limitations, 28 U.S.C. Sec. 2462. The Second Circuit held that the discovery rule did apply and that the SEC's action was therefore timely. Oral Argument.

• Limit-Up Limit-Down Pilot.

On January 7th, Reuters reported that the SEC will likely delay the start of a pilot meant to address extraordinary volatility in individual securities, and the securities market as a whole. Delay.

• Staff Announcements.

Geoffrey F. Aronow has been named the SEC's General Counsel. Enforcement Director Robert Khuzami is leaving.

• Futurization Hearings.

On January 10th, Reuters reported the CFTC will hold hearings on the effect its derivatives rules are having on swaps trading. The hearings will focus on whether swaps trading is moving to futures exchanges in part because the agency's rules for the block trading of swaps do not affect futures. Futurization.

• Cross Margining.

On January 8th, Bloomberg reported the CFTC will soon issue rules permitting the cross-margining of customer portfolio accounts. Cross-Margining. The SEC published analogous rules on December 14, 2012. SEC Release No. 34-68433.

• CFTC Relief for Dually Registered Firms.

CFTC staff have published a series of no-action letters providing relief to dually registered firms. In CFTC Letter No. 12-72, the Division of Swap Dealer and Intermediary Oversight stated it would not recommend enforcement action against a SEC-registered investment adviser for failing to register with the CFTC as a commodity pool operator or a commodity trading adviser. The adviser acts as the sponsor and investment manager for a pension plan group trust. Each of the plans participating in the group trust is within the categories of plans excluded under Commodity Exchange Act Regulation 4.5 from the "pool" definition. In CFTC Letter No. 12-73, the Division of Clearing and Risk provided relief to the Options Clearing Corporation, a derivatives clearing organization ("DCO") that is dually registered as a securities clearing agency, for failing to enforce certain of its clearing member requirements. Under the relief, the OCC may waive the applicability of certain of its bylaws and rules to facilitate a transaction involving the transfer, assignment and assumption of the securities correspondent clearing business of one clearing member to another. In CFTC Letter No. 12-74, the Division of Clearing and Risk extended the relief granted in CFTC Letter No. 12-73.

• Joint Final Rule – Office of the Comptroller of the Currency; Federal Reserve System; Federal Deposit Insurance Corporation

January 1, 2013 – Risk-Based Capital Guidelines: Market Risk. 77 FR 53059.

January 1, 2013 – Community Reinvestment Act Regulations (Technical Amendment) 77 FR 75521.

• Commodity Futures Trading Commission

January 2, 2013 – Adaptation of Regulations to Incorporate Swaps. 77 FR 66288.

February 11, 2013 – Clearing Requirement Determination Under Section 2(h) of the CEA 77 FR 74283.

• Consumer Financial Protection Bureau

January 1, 2013 – Consumer Leasing (Regulation M) 77 FR 68735.

January 1, 2013 – Truth in Lending (Regulation Z) 77 FR 69736.

January 2, 2013 – Defining Larger Participants of the Consumer Debt Collection Market. 77 FR 65775. 77 FR 72913. (Correction)

February 7, 2013 – Electronic Fund Transfers (Regulation E) 77 FR 50243. 77 FR 40459. (Correction) 77 FR 6194.

• Federal Housing Finance Agency

February 11, 2013 – Relocation of Regulations. 78 FR 2319.

• Pension Benefit Guaranty Corporation

January 1, 2013 – Allocation of Assets in Single-Employer Plans; Valuation of Benefits and Assets; Expected Retirement Age. 77 FR 71321.

• Securities and Exchange Commission

January 2, 2013 – Clearing Agency Standards. 77 FR 66220.

• FINRA Asks Crowdfunding Portals to Voluntarily Register.

On January 10th, the Financial Industry Regulatory Authority announced the publication of a voluntary "Interim Form for Funding Portals" for prospective crowdfunding portals under the JOBS Act. Those intending to become a funding portal may voluntarily submit information regarding their business on the interim form. The information received will help FINRA develop rules specific to crowdfunding portals. FINRA Press Release.

• FINRA Summarizes 2012; Chairman Discusses 2013.

On January 8th, FINRA noted its activities during 2012. Highlights include enforcement activity in the areas of complex products and mispricing, and market integrity initiatives. FINRA Press Release. In an interview with DealBook, FINRA's Chairman, Richard Ketchum, discussed the regulator's 2013 priorities which include high-speed trading and complex products. Priorities. The Wall Street Journal reported FINRA will also focus on private trading venues. Dark Pools.

• FINRA Guidance on Communications with the Public.

On January 7th, FINRA provided additional guidance on compliance with its new rules concerning communications with the public. FINRA Regulatory Notice 13-03.

• FINRA's Anti-Money Laundering Focus.

On January 6th, Investment News discussed the focus of FINRA's anti-money laundering efforts. AML.

• FINRA Proposed Rule to Require Disclosure of Conflicts of Interest Relating to Recruitment Compensation Practices.

On January 4th, FINRA published for comment a proposed rule that would require a member firm to make specific disclosures of the financial incentives it provides a representative as part of his or her relationship with the firm. The recruiting member firm would be required to provide the disclosure before a former retail customer of the representative makes a final determination to transfer an account to the new firm. Comments should be submitted on or before March 5, 2013. FINRA Regulatory Notice 13-02.

• Amendments to Performance Evaluations for Certain Traders Are Approved.

On January 3rd, the SEC approved NASDAQ OMX PHLX's proposed amendments to its performance evaluations with respect to Streaming Quote Traders and Remote Streaming Quote Traders. The amendments affect the standards used by the Exchange to evaluate quote submission. SEC Release No. 34-68574.

• Amendments to Rules Governing Settlement Accounts Are Approved.

On January 9th, the SEC approved the Options Clearing Corporation's proposal clarifying the OCC's right to use margin and other amounts credited to the Liquidating Settlement Account pursuant to OCC Rule 1104 to settle mark-to-market payments arising from stock loan and borrow positions carried in the clearing member's customers' account even though such payments are required by OCC's Rules to be settled in the clearing member's firm account or its combined market makers' account. The amendment also provides that any proceeds from stock loan and borrow positions carried in the customers' account could be applied only to obligations arising in such account, as is the case with margin assets deposited in respect of that account. SEC Release No. 34-68602.

• The Limits of Short-Swing Profits Liability.

On January 7th, the Second Circuit held that Securities Exchange Act Section 16(b) liability for short-swing profits does not attach when a corporate insider sells shares of one type of stock issued by the insider's company and purchases shares of a different type of stock in that same company. Absent SEC guidance, Section 16(b) does not apply to transactions of this sort involving separately traded, nonconvertible stocks with different voting rights. Gibbons v. Malone.

• Parent Liability.

On January 7th, the U.S. District Court denied a motion to dismiss in a federal securities fraud and common law fraud action. Plaintiff seeks to hold liable Credit Suisse Group ("CSG") for the alleged fraudulent conduct of brokers at its subsidiary, Credit Suisse Securities ("CSS"). Seeking dismissal, CSG argues it is not a control person of CSS nor is CSS its agent. Denying that motion, the Court holds plaintiff adequately alleged that CSS acted as CSG's agent. Although neither a parent-subsidiary relationship nor a shared-brand identity create a presumption of agency, those features, combined with plaintiff's allegations that the CSS brokers led a group reporting to CSG, make the agency allegations plausible. Plaintiff similarly adequately alleged facts establishing CSG as a control person under the Securities Exchange Act. Elbit Systems, Ltd. v. Credit Suisse Group.

• Puerto Rico-Based Mutual Fund Shareholders can Derivatively Sue Investment Adviser.

On January 4th, the First Circuit vacated the dismissal of a shareholder derivative suit filed by Puerto Rico based pension funds who invested in investment funds exempt from Investment Company Act registration. The pension funds sued the funds' directors, UBS Trust (the investment adviser), and UBS Financial. UBS Trust had purchased for the funds bonds underwritten by UBS Financial which comprised 15 to 30 percent of the funds' holdings. The funds therefore incurred significant losses when the bonds' value fell. After determining that the case should be reviewed de novo, the Court vacated the dismissal of the shareholders' claims. Applying Delaware law, the First Circuit held the plaintiffs established a reasonable doubt about the ability of a majority of the funds' directors to evaluate plaintiffs' demand to bring suit. In doing so, the Court noted the significant ties the directors had with the corporate defendants. Union de Empleados de Muelles de Puerto Rico PRSSA Welfare Plan v. UBS Financial Services Inc. of Puerto Rico.

• Software Glitch at BATS Discovered after Four Years.

On January 10th, Bloomberg reported that BATS Global Markets disclosed that software programs used on two equities exchanges and one options exchange inadvertently permitted trades at prices below the best bid and offer and in violation of short-selling restrictions. Trading Violations. Separately, Bloomberg reported the SEC is examining whether other exchanges experienced similar problems. The exchanges, meanwhile, blame convoluted SEC regulations for the trading errors claiming that simpler rules would lead to fewer mistakes. Broader View.

• Data Aggregation and Risk Reporting.

On January 9th, the Basel Committee on Banking Supervision issued Principles for Effective Risk Data Aggregation and Risk Reporting. The principles are intended to strengthen banks' risk data aggregation capabilities and internal risk reporting practices. Global systemically important banks are required to implement the principles in full by the beginning of 2016. In addition, the Committee strongly suggests that national supervisors apply these principles to institutions identified as domestic systemically important banks three years after their designation as such. Finally, the Basel Committee believes that the principles can be applied to a wider range of banks, in a way that is proportionate to their size, nature and complexity. BIS Press Release.

• Money Market Disclosure.

On January 9th, Bloomberg reported that JP Morgan and Goldman Sachs will begin disclosing the daily net asset value of the commercial paper backing some of their money market mutual funds. Money Markets. On January 10th, Investment News reported BlackRock will also disclose its money market's actual NAV and that Fidelity Investments is considering doing so. Actual NAV. Reuters excerpted a comment letter sent by the independent trustees of Fidelity's money market funds to the Financial Stability Oversight Council. The trustees called the FSOC's proposed money market reforms "perverse." Comments.

• Causal Connections.

On January 8th, the Economist summarized the results of a research paper studying the effect credit default swaps have on the companies upon which the CDS is written. Causal Connections.

• A Financial Caller ID.

On January 7th, Forbes discussed the benefits of global identifiers for financial firms and the products they issue. Caller ID.

• Stemming Systemic Risk.

On January 6th, Bloomberg summarized the efforts of Federal Reserve Board Governor Daniel Tarullo to protect the financial system, and taxpayers, in the event of a large bank's failure. Stemming Risk.

• FinCEN Considers Suspicious Activity Reports for Hedge Funds.

On January 4th, Reuters reported the Financial Crimes Enforcement Network is considering a rule that would require hedge funds to file suspicious activity reports. Included among the activity that would have to be reported is insider trading. Self-Reporting. On January 7th, DealBook considered whether a requirement to self-report insider trading would violate the Fifth Amendment. Self-Incrimination.

• Private Equity Update - Winter 2013.

The Winston & Strawn Private Equity Newsletter is a quarterly publication intended to provide insight into the latest legal and industry developments affecting private equity funds and their portfolio companies. Newsletter.

• London Fortnightly Financial Newsletter, Volume 1, Issue 4.

Litigation — Fortnightly Financial News is written by lawyers in Winston & Strawn LLP's London office, focussing on developments within the financial services industry. Newsletter.

• Antitrust and Competition—The EU Weekly Briefing, Vol. 1, Issue 10.

Antitrust and Competition — The EU Weekly Briefing is designed to provide timely updates on recent European Union competition law by including a short description of, and links to, recent developments. EU Weekly Briefing.

• China Imposes Its First Fines on Foreign Firms for Price-Fixing Conduct.

On January 4, 2013, the National Development and Reform Commission, China's antitrust regulator with jurisdiction to investigate and deal with price-related monopolistic conduct, announced its first settlement with foreign companies charged with price fixing. Briefing.

• EU Adopts Additional Financial Sanctions Against Iran Background.

On 21 December 2012, the Council of the European Union adopted Council Regulation No. 1263/2012 implementing additional restrictive measures against Iran. Briefing.

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