The Jumpstart Our Business Startups Act (the "JOBS Act") was signed into law more than one year ago, on April 5, 2012. Some of its provisions became effective immediately, while others directed the SEC to issue rules for the implementation of the intended changes within a stated period of time. Among the latter group, Section 201(a) and (b) of the JOBS Act directs the SEC to issue rules to relax the longstanding prohibition on general solicitation and advertising for certain private placements. Now long past the deadline by which the new rule was to be issued — the original deadline was July 4, 2012 — the rule has not been issued and there is no concrete update on the status of its issuance. Recently, SEC Commissioner Elisse Walter testified before the House Committee on Financial Services about the sharply divided comments the SEC has received regarding the proposed rule it published in August 2012. Several comments recommended clarifying the verification requirement of the proposed rule by supplementing the proposed framework for verifying accredited investor status. Others — including the SEC's Investor Advisory Committee formed by the SEC as required under the Dodd-Frank Act — were generally opposed to the proposed rule because of the increased potential for fraudulent activities. Commissioner Walter noted that the rule remains a high priority, but she did not commit to a date for the release of the rule. Winston & Strawn LLP will continue to monitor events related to this rulemaking.

• The Terminating Bailouts for Taxpayer Fairness Act.

On April 24th, Senators Sherrod Brown (D-OH) and David Vitter (R-LA) announced they would be introducing the Terminating Bailouts for Taxpayer Fairness Act. The bill would impose a new, 15 percent capital requirement on banks with $500 billion or more in assets, prohibit banking regulators from allowing non-depository bank units to access the Federal Reserve discount window, require separate capitalization for bank subsidiaries, and prohibit bank holding companies from moving assets from non-banking affiliates to banking affiliates. Joint Press Release.

• Investment Advisor User Fee Legislation Introduced.

On April 19th, Representatives Maxine Waters (D-CA)and John Delaney (D-MD) introduced H.R. 1627, the Investment Adviser Examination Improvement Act of 2013, which would give the SEC the authority to charge the investment advisory industry with user fees to fund adviser oversight.

• Proposed Guidance on Deposit-Advance Products.

On April 25th, the FDIC published for comment proposed supervisory guidance to FDIC-supervised financial institutions that offer or may consider offering deposit advance products. The proposal is intended to ensure that banks are aware of a variety of safety and soundness, compliance, and consumer protection risks posed by deposit advance loans. The proposal details the principles that the FDIC expects financial institutions to follow in connection with deposit advance products in order to effectively mitigate potential legal, reputational, consumer protection, compliance, and credit risks. The proposal discusses supervisory expectations for the use of deposit advance products, including underwriting and credit administration policies and practices. The proposal supplements existing FDIC guidance on payday loans and subprime lending. FDIC Press Release. Separately, the OCC published for comment similar guidance for national banks and federal savings associations. The OCC will closely review the activities of banks that offer or propose to offer deposit advance products, through direct examination of the bank, examination of any third party participating in such transactions under an arrangement with the bank, and, where applicable, review of any licensing proposals involving this activity. These examinations will focus not only on safety and soundness risks, but also on compliance with applicable consumer protection laws. The OCC also withdrew its proposed guidance on Deposit-Related Consumer Credit Products published on June 8, 2011. OCC Press Release; OCC Bulletin. Comments on either proposal should be submitted within 30 days after publication in the Federal Register, which is expected shortly.

• FSOC 2013 Annual Report.

On April 25th, the Treasury Department announced that the Financial Stability Oversight Council approved its 2013 annual report. Among other things, the report discusses the wholesale funding markets' vulnerabilities; operational risks that can cause major disruptions to the financial system; and the reliance on reference interest rates. Treasury Department Press Release. In his remarks at the FSOC's meeting Treasury Secretary Jacob J. Lew said that the FSOC will soon vote on the designations of an initial set of nonbank financial companies. Lew Remarks.

• FinCEN Advisories.

On April 24th, the Financial Crimes Enforcement Network issued advisories to inform banks and other financial institutions operating in the United States of the risks of money laundering and financing of terrorism associated with jurisdictions identified by the Financial Action Task Force ("FATF"), on February 22, 2013, as having deficiencies in their AML/CFT regimes. FIN-2013-A004 discusses countries that have not made sufficient progress in addressing deficiencies or are subject to FATF's call for countermeasures. FIN-2013-A003 addresses FATF's identification of jurisdictions with strategic AML/CFT deficiencies for which each jurisdiction has provided a high-level political commitment to address.

• CFPB Reports on Payday Lending.

On April 24th, the Consumer Financial Protection Bureau published a report on payday lending. CFPB Press Release.

• Treasury Designates Two Lebanese Exchange Houses under the USA PATRIOT Act.

On April 23rd, the Treasury Department named two Lebanese exchange houses, Kassem Rmeiti & Co. For Exchange ("Rmeiti Exchange") and Halawi Exchange Co. ("Halawi Exchange"), as foreign financial institutions of primary money laundering concern under Section 311 of the USA PATRIOT Act. This is the first time the Department has used Section 311 against a non-bank financial institution. In conjunction with the findings that Rmeiti Exchange and Halawi Exchange are foreign financial institutions of primary money laundering concerns, Treasury's Financial Crimes Enforcement Network also issued an order, effective immediately and with a 120-day duration, that requires U.S. financial institutions to report information on any new or attempted transactions by Rmeiti Exchange and Halawi Exchange. Treasury also issued a notice of proposed rulemaking that, if adopted as a final rule, would continue the reporting requirement imposed by the order and prohibit any U.S. financial institution from opening or maintaining a correspondent or payable-through account that is used to process a transaction that involves Rmeiti Exchange and Halawi Exchange, effectively cutting off these exchanges from the U.S. financial system. Treasury Department Press Release.

• CFPB Issues Final Determinations Regarding Two States' Unclaimed Gift Card Laws.

On April 19th, the Consumer Financial Protection Bureau published a final determination as to whether certain laws of Maine and Tennessee relating to unclaimed gift cards are inconsistent with and preempted by the Electronic Fund Transfer Act and Regulation E. The Bureau determined that it has no basis for concluding that the provisions at issue in Maine's unclaimed property law relating to gift cards are inconsistent with, or therefore preempted by, Federal law. However, the Bureau has determined that one provision in Tennessee's unclaimed property law relating to gift cards is inconsistent with, and therefore is preempted by Federal law. The determination is effective April 25, 2013.

• Unblocking Notices.

On April 25th, the Treasury Department's Office of Foreign Assets Control removed the name of 1 individual whose property and interests in property are blocked pursuant to Executive Order 13572 of April 29, 2011, "Blocking Property of Certain Persons with Respect to Human Rights Abuses in Syria," from the list of Specially Designated Nationals and Blocked Persons.

• Form PF Guidance.

The Division of Investment Management has updated its Form PF frequently asked questions and answers page. Q&A.

• Enforcement Focus.

On April 26th, Bloomberg summarized the remarks of George Canellos, the SEC's co-head of the Enforcement Division. Canellos told the Practicing Law Institute that his unit will be focusing on Dodd-Frank Act enforcement. Canellos Comments.

• Fee Rate Advisory.

On April 25th the SEC announced that starting on May 25, 2013, the fee rates applicable to most securities transactions will decrease from $22.40 per million dollars to $17.40 per million dollars. The assessment on security futures transactions will remain unchanged at $0.0042 for each round turn transaction. Fee Rate Advisory. See also SEC Release No. 34-69449.

• Insurance Networking Arrangements.

On April 23rd, the Division of Trading and Markets advised that it will not recommend enforcement action to the Commission if insurance agencies, without registering as broker-dealers under Section 15(b) of the Securities Exchange Act, enter into insurance networking arrangements with registered broker-dealers for the offer and sale of variable products and make transaction-based payments based on the sale of variable products. No-Action Letter.

• Division of Investment Management Update on Form 13F.

On April 23rd, the Division of Investment Management provided an update regarding revisions to Form 13F. The new online form is expected to be available on the EDGAR Filing Website no sooner than May 20, 2013, three weeks later than originally announced. Filers will continue to use the current format (text-based ASCII) through at least May 17, 2013. Under this schedule, filers will be required to use the new online form and to construct their Information Tables according to the Form 13F XML Technical Specification beginning May 20. The staff will publish another update when the roll-out date has been confirmed.

• ETFs.

On April 23rd, Reuters reported the SEC may re-publish for comment its 2008 proposed rule that would exempt basic exchange-traded funds from the registration requirements of the Investment Company Act. See SEC Release No. 33-8901. Alternatively, the Commission may issue a new proposal. ETFs.

• Looking for Loopholes.

On April 23rd, Risk.net discussed the belief that exchanges may be colluding with high-frequency traders to create new special order types to take advantage of loopholes in Regulation NMS. Loopholes.

• Tweet Retreat.

On April 23rd, Reuters, citing SEC Commissioner Daniel Gallagher, reported that the Commission is investigating a fake tweet that sent stock markets down almost one percent in three minutes. Hackers who gained access to the Associated Press news service's Twitter account said that two bombs had exploded at the White House. Among other things, the SEC is examining how its new circuit breakers reacted to the market volatility. Volatility. CNBC noted that not much can be done to prevent future "fake news" events and that those harmed by the market volatility probably will not be compensated. Fake News. Bloomberg focused on how high-frequency trading firms use social media like Twitter in their trading algorithms. Data Stream.

• Whistleblowers.

On April 23rd, DealBook discussed the future of the SEC's whistleblowing program and whether efforts to counter the program will prove both proper and effective. Whistleblowers.

• Co-Enforcement.

On April 22nd, the SEC announced that Acting Director George Canellos and former federal prosecutor Andrew Ceresney have been named Co-Directors of the Division of Enforcement. SEC Press Release.

• The Power of Deduction.

On April 22nd, DealBook compared how the SEC approached the trades made by Richard Bruce Moore, who had worked at the Canadian Imperial Bank of Commerce, with how the Ontario Securities Commission ("OSC") approached those same trades. While the SEC concluded that the trades amounted to insider trading, see SEC Press Release, the OSC found that they were "inappropriate," see OSC Press Release. The SEC's decision to charge Moore with insider trading based on information DealBook considers to be the product of deductive reasoning, also demonstrates the U.S. agency's aggressive position. The Power of Deduction.

• Commissioner Aguilar Discusses the Importance of Institutional Investors.

On April 19th, SEC Commissioner Luis A. Aguilar discussed the important role institutional investors can play. He spoke at length at how these investors can counteract the potential negative effect which the JOBS Act's emerging growth company provisions may have. Aguilar encourages institutional investors and the academic community to monitor the performance of emerging growth companies that elect to provide limited disclosure to determine whether real capital formation is being helped or hurt. Aguilar also encouraged institutional investors to use their influence to affect corporate governance, generally, and with respect to executive compensation, specifically. Aguilar Remarks.

• Agenda for Small and Emerging Companies Advisory Committee Meeting.

The SEC announced the agenda for a meeting of its Advisory Committee on Small and Emerging Companies which will occur on May 1, 2013. SEC Press Release.

• Agenda for Credit Ratings Roundtable.

The SEC announced the agenda for its Credit Ratings Roundtable, which will be held on May 14, 2013. SEC Press Release.

• Technology Advisory Committee.

The CFTC's Technology Advisory Committee will meet on April 30, 2013 to discuss issues related to swap data reporting. The committee will also receive an update on the implementation of an industry-led technology solution to protect customer funds, and compliance with certain requirements imposed under Part 1 of the CFTC's Regulations. CFTC Press Release.

• Swap Rate Investigation.

On April 23rd, Bloomberg reported that the U.K.'s Financial Conduct Authority is joining in the CFTC's investigation into alleged manipulation of ISDAfix. Investigation.

• Commodity Futures Trading Commission

April 11, 2013 – Delegation of Authority To Disclose Confidential Information to a Contract Market, Registered Futures Association or Self-Regulatory Organization. 78 FR 21522.

• Consumer Financial Protection Bureau

June 1, 2013 (Amendments) – Loan Originator Compensation Requirements Under the Truth in Lending Act (Regulation Z). 78 FR 11279.

• Federal Housing Finance Agency; Federal Housing Finance Board

April 12, 2013 – Repeal of Disclosure Regulations. 78 FR 15869.

• Federal Reserve System

May 6, 2013 – Definitions of "Predominantly Engaged In Financial Activities" and "Significant" Nonbank Financial Company and Bank Holding Company. 78 FR 20755.

• National Credit Union Administration

April 1, 2013 – Chartering and Field of Membership Manual for Federal Credit Unions. 78 FR 13460.

• Securities and Exchange Commission

June 10, 2013 – Amendment to Rule Filing Requirements for Dually-Registered Clearing Agencies. 78 FR 21046.

• Facebook Exemptions.

On April 22nd, CNN Money discussed the Financial Industry Regulatory Authority's efforts to exempt broker-dealers from state laws that prohibit employers from monitoring their employees' private social network activities. Facebook Exemptions.

• Proposed Complex Order Amendments Approved.

On April 19th, the SEC approved the BOX Options Exchange's proposed amendment of its rules governing the trading of Complex Orders to: (i) adopt definitions applicable to Complex Orders; (ii) specify additional order types for Complex Orders; (iii) revise the priority rules for Complex Orders; (iv) revise the rules governing the execution of Complex Orders and establish a filtering process for Complex Orders to assure that each leg of a Complex Order is executed at a price that is equal to or better than the National Best Bid or Offer and the BOX best bid or offer for that series; (v) provide for the generation of Legging Orders; (vi) describe the treatment of Legging Orders in the Price Improvement Period auction; (vii) provide for the generation of Implied Orders; (viii) delete or update miscellaneous provisions and rules; and (ix) provide for the display of Legging Orders, Complex Orders, and Implied Orders in BOX's proprietary High Speed Vendor Feed. SEC Release No. 34-69419.

• FINRA Withdraws BrokerCheck Proposal.

On April 24th, Reuters reported the Financial Industry Regulatory Authority has withdrawn a proposed rule filed with the SEC that would have required broker-dealers to include a link to FINRA's BrokerCheck program on the broker-dealers' websites. FINRA intends to re-file the proposal after modifying it in response to comments. Withdrawal.

• FINRA's Proposed Amendment to Market Making Rule is Immediately Effective.

On April 18th, the SEC granted immediate effectiveness to the Financial Industry Regulatory Authority's proposed amendment to FINRA Rule 5250 (Payments for Market Making) to create an exception for payments to members that are expressly provided for under the rules of a national securities exchange. FINRA believes certain exchange program structures, such as the one adopted by NASDAQ, could be deemed an indirect payment under Rule 5250; however, FINRA does not believe that such arrangements should be prohibited under the Rule because those payments would be made as part of a transparent structure put in place by another self-regulatory organization pursuant to a rule change, which generally must be approved by the SEC following publication for public comment. Accordingly, where a market maker payment is provided for under the rules of an exchange that are effective after being filed with, or filed with and approved by, the SEC pursuant to the requirements of the Act, it is FINRA's view that comity should be afforded to such exchange rulemaking and the payment should not be prohibited under Rule 5250. Comments should be submitted on or before May 15, 2013. SEC Release No. 34-69398.

• Remote Streaming Quote Trader Organizations Approved.

On April 19th, the SEC approved NASDAQ OMX PHLX's proposal to add a new category of member organizations, called Remote Streaming Quote Trader Organizations, to be eligible to register as Registered Options Traders on the Exchange. SEC Release No. 34-69417.

• Longer Period Designated to Consider Proposed Internal Audit Requirement.

On April 18th, the SEC designated June 6, 2013 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding the NASDAQ Stock Market's proposal requiring listed companies to have an internal audit function. SEC Release No. 34-69402.

• CPO and CTA Quarterly Reporting Requirements.

On April 24th, the National Futures Association announced amendments aimed at eliminating duplication and aligning NFA filing deadlines with those of the CFTC. NFA Notice to Members I-13-12.

• Business Conduct Standards and Documentation Requirements for Swap Dealers and Major Swap Participants.

On April 23rd, the National Futures Association reminded members that provisionally registered swap dealers ("SDs") and major swap participants ("MSPs") are required to submit policies and procedures relating to the CFTC's business conduct standards by May 1, 2013. Non-U.S. SDs and MSPs are not required to submit policies and procedures relating to CFTC Regulation 23.201(b)(3)(ii) at this time. The NFA has recommended that policies and procedures be submitted prior to the required submission date to allow time for NFA staff to confirm receipt of responsive materials and to accommodate potential follow-up with SDs and MSPs in the event of an incomplete submission. At a minimum, policies and procedures must be submitted to the NFA's Registration Documentation Submission System no later than 6:00 PM (EST) on the submission date in order for staff to confirm receipt of required documents ahead of overnight processing. NFA Notice to Members I-13-11.

• Designated Market Maker Amendments Proposed.

On April 23rd, the SEC provided notice of the New York Stock Exchange’s and NYSE MKT’s individual filing of proposed amendments to their respective rules to codify certain traditional Trading Floor functions that may be performed by Designated Market Makers ("DMMs"), to make exchange systems available to DMMs that would provide DMMs with certain market information, to amend the respective exchange’s rules governing the ability of DMMs to provide market information to Floor brokers, and to make conforming amendments to other rules. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of April 29.

• Revision to Clearing Fund Calculation Approved.

On April 18th, the SEC approved The Options Clearing Corporation’s proposed rule change to implement a revised method of calculating Clearing Members’ respective contributions to OCC’s Clearing Fund. SEC Release No. 34-69403.

• D.C. Circuit Won't Hear Resource Extractor Rule Challenge.

On April 26th, the D.C. Circuit dismissed a petition seeking to invalidate the SEC's resource extractor disclosure rules. Petitioners brought constitutional and statutory challenges to the Dodd-Frank Act's requirement that certain issuers disclose payments made to foreign governments relating to the commercial development of oil, natural gas, or minerals, and the SEC's rules implementing that provision. The D.C. Circuit dismissed the petition for lack of jurisdiction. Because of the manner in which the rule was promulgated, challenges of the rule must first be brought in the federal district court. American Petroleum Institute v. SEC.

• The Mens Rea of No Knowledge.

On April 25th, the Eighth Circuit addressed whether defendant's claimed lack of knowledge that the securities laws applied to the promissory notes he sold to investors meant that he could not be sentenced to prison for violating those laws. Defendant and the government reached a plea agreement that did not provide for defendant's sentencing. After defendant's guilty plea was entered, the district court sentenced him to five years' imprisonment, three years of supervised release, and restitution in the amount of $6,841,921.90. Defendant appealed the sentence arguing that because he did not know that his conduct violated Rule 10b-5, imprisonment was not a permissible sentencing option. Affirming the sentence, the Court held that to avoid imprisonment a defendant must establish that he did not know the substance of the SEC rule he allegedly violated regardless of whether he understood its particular application to his conduct. U.S. v. Behrens.

• Subprime Mortgage RICO Suit Reinstated.

On April 23rd, the Sixth Circuit reinstated a home owner's lawsuit against his mortgage lender, mortgage broker, and others. The borrower alleged that defendants inflated an appraisal of his home as part of a scheme to push him into a high-cost loan which would generate higher fees for defendants. Reversing the entry of summary judgment dismissing the lawsuit, the Sixth Circuit holds plaintiff adequately alleged an injury under the Racketeer Influenced and Corrupt Organizations Act. Genuine issues of fact exist regarding whether defendants committed fraud by producing and sending through the mail a false appraisal as part of a larger scheme to secure high-interest loans. The Court therefore reinstated plaintiff's substantive RICO claim as well as his RICO conspiracy and state law conspiracy claims. Wallace v. Midwest Financial & Mortgage Services, Inc.

• Presumption of Prudence Prevails in ERISA Case.

On April 19th, the Seventh Circuit rejected the Sixth Circuit's opinion in Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012), which allows employees seeking to hold 401(k) plan fiduciaries liable for investment imprudence to overcome the presumption of prudence by showing that a prudent fiduciary acting under similar circumstances would have made a different investment decision. Instead, the Seventh Circuit holds that employees wishing to overcome the presumption of prudence must show that no reasonable fiduciaries would have thought they were obligated to continue offering company stock. White v. Marshall & Isley Corporation.

• Search Terms as Market Predictor.

On April 25th, Pensions & Investments summarized the findings of a paper that studied the relationship of certain search terms and stock market movements. It quotes the paper as finding a "relationship between the volume of search queries for a specific term and the overall direction of trader decisions." Market Predictor.

• Extension of Time.

On April 24th, Risk.net reported that CFTC Commissioner Bart Chilton will ask Congress to extend the statute of limitations for agency enforcement actions seeking civil money penalties. The request follows the U.S. Supreme Court's February 2013 ruling in Gabelli v. SEC, in which the Court held that a SEC enforcement action brought against mutual fund executives 5-1/2 years after the alleged fraud stopped was untimely. Extension of Time.

• Balkanized Banks.

On April 20th, the Economist discussed the Federal Reserve Board's proposed rule that would require foreign banks to consolidate their U.S. operations into one U.S.-supervised subsidiary. The proposal is just one example of what the Economist calls the deglobalization of finance. Balkanized Banks.

• Britain Challenges Financial Transaction Tax.

On April 19th, the Telegraph reported that the British government has filed in the European Court of Justice a challenge to a decision by 11 European countries to levy a financial transaction tax. The British challenge questions the cross-border reach of the tax. Challenge.

• Antitrust and Competition — The EU Weekly Briefing, Vol. 1, Issue 25.

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.

• FATCA Implementation: What Private Investment Fund Managers Need To Know Now

Winston & Strawn will host an eLunch titled "FATCA Implementation: What Private Investment Fund Managers Need To Know Now" on Wednesday, May 1, 2013 at 12:15 — 1:30 p.m. Please join Winston & Strawn partner Mitch Moetell for a practical, interactive presentation on the key points that private investment fund managers need to understand in order to prepare for FATCA implementation. eLunch.

• Winston & Strawn Sponsors Managed Funds Association's Forum 2013 in Chicago

Winston & Strawn will sponsor Forum 2013, the Managed Funds Association's ("MFA") 19th annual managed futures and global macro strategies conference. This program is designed to bring managers and investors together for networking, education and business development. Forum 2013 will be held June 19-20, 2013 in Chicago. Event.

• Contact Us.

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