• FinCEN Withdraws Proposed AML Rules for Certain Unregistered Entities.

On October 30th, the Financial Crimes Enforcement Network announced it has withdrawn its proposed anti-money laundering program rules for unregistered investment companies, commodity trading advisors and investment advisers. FinCEN has determined that it will not proceed with Bank Secrecy Act ("BSA") requirements for these entities without publishing new proposals and allowing for industry comments. FinCEN will continue to consider whether and to what extent it should impose requirements under the BSA on these entities. FinCEN Press Release.

• Congress Likely to Reconsider Energy Speculation Legislation.

On October 30th, Reuters reported Senator Maria Cantwell expects Congress to reexamine possible energy speculation legislation upon its return from recess. Legislation.

• GMAC May Become Bank Holding Company.

On October 30th, the Los Angeles Times reported GMAC, General Motors Corp.'s financing unit and an industrial bank, may convert to a bank holding company. That step would give GMAC access to the Treasury Department's Capital Purchase Program, make it eligible for temporary FDIC guarantees of its debts and allow it to borrow from the Federal Reserve. It would also subject GMAC and significant shareholders to additional federal regulation. Bank Holding Company.

• FDIC Could Guarantee Insurance Companies.

On October 29th, Reuters reported the remarks of FDIC Chairman Sheila Bair. Among other things, Bair noted that the FDIC could provide guarantees for insurance companies, as it currently does for banks, if Congress decides to regulate insurance companies at a federal level. The FDIC is also working with other Administration officials on the development of a program for the modification of troubled home mortgages. Bair Remarks.

• Capital Purchase Program Funds.

On October 29th, the Washington Post reported Representative Henry Waxman has asked the nine banks receiving the first funds released by the Treasury Department's Capital Purchase Program to establish that they will not use the funds for executive bonuses. Bonuses. Reuters reported House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid have written Treasury Secretary Henry Paulson asking that the Treasury Department restrict Capital Purchase Program recipients' use of golden parachutes. House Minority Leader John Boehner wrote a similar letter. Restrictions. The New York Times reported the New York State Attorney General has written the nine banks to request an accounting of bonuses for senior executives in the upcoming bonus season. The New York Attorney General further warned that compensation which exceeds the value of services received may violate state law. Letter. On October 31st, Reuters reported Representative Barney Frank, Chairman of the House Financial Services Committee, wants the Treasury Department to make explicit that Capital Purchase Program funds are for lending and not for executive compensation, the payment of dividends or for acquisitions. Purpose.

• U.S. Companies Adopting Clawback Provisions.

On October 29th, Reuters reported almost two-thirds of U.S. companies have adopted clawback provisions that allow firms to recover compensation paid to executives engaged in misconduct. Clawback.

• CDS Developments.

On October 28th, Bloomberg reported the Federal Reserve Board has requested U.S. futures exchanges to submit by October 31, 2008, proposals on how they would create a central clearinghouse for credit default swaps. From those proposals the Board is expected to select a framework for the operation of a clearinghouse. Regulations for that framework could be in place by mid-November. Clearinghouse. On October 31st, Bloomberg reported the Depository Trust & Clearing Corporation will publish on a weekly basis the gross and net amount of credit default swap contracts traded. Disclosure. The New York Times reported on the decision of the U.S. Attorney and New York State Attorney General to jointly investigate CDS. Cooperation. Reuters reported Senator Jack Reed has written SEC Chairman Christopher Cox asking what authority the SEC should have over CDS. The Senator also asked the Chairman of the New York Federal Reserve Bank, Timothy Geithner, whether CDS contracts should be settled on an exchange or through a central clearinghouse. Letters.

• 401(k)'s Reliance on Mutual Funds Questioned.

On October 28th, Reuters reported that the recent instability in the financial markets is leading some to question the current U.S. 401(k) retirement model's reliance upon mutual funds. Questions.

• Asset-Backed Securities Lawsuit against Bank of America Begins.

On October 27th, the New York Times reported on the securities fraud trial against Bank of America. Plaintiffs allege the bank made material omissions in its sale of the asset-backed securities of Heilig-Meyers Company, once one of the largest home furniture retailers. Plaintiffs claim defendants did not tell investors that Heilig-Meyers kept two sets of accounting books and that the company was basing its loss and delinquency statistics on historical patterns rather than current data based on actual payments and collections. Lawsuit.

• Justice Department Investigating Municipal Derivatives.

On October 27th, Bloomberg reported on the Justice Department's investigation of JP Morgan's municipal derivatives unit. In the largest-ever criminal investigation of municipal finance, federal prosecutors are examining whether investment bankers defrauded municipalities by failing to disclose fees charged for interest rate swap contracts. The Justice Department has advised at least five former JP Morgan derivatives bankers that they are targets of the investigation. Municipal Derivatives.

• SEC Requires Electronic Filing of Investment Company Exemptive Requests.

On October 29th, the SEC adopted rule revisions requiring mutual funds and other companies seeking exemptions under the Investment Company Act to submit their applications electronically. The amendments are effective January 1, 2009. SEC Release No. 33-8981; SEC Press Release.

• Hearings May be Sought on Reserve Fund's Request to Suspend Redemptions and Postpone Payment.

On October 27th, the SEC announced interested persons may request a hearing on the SEC's order granting the Reserve Fund's request, on behalf of the Reserve Primary Fund and the U.S. Government Fund, to suspend redemptions and to postpone payment on redemptions requests for which payment has not been made. Hearing requests should be received by the Commission on or before 5:30 PM (ET) on November 13, 2008. SEC Release No. IC-28465. A hearing may also be requested on or before 5:30 PM (ET) on November 17, 2008, on the requests of Reserve Municipal Money-Market Trust, on behalf of the Arizona Municipal Money-Market Fund and the Minnesota Municipal Money-Market Fund; Reserve Municipal Money-Market Trust II, on behalf of the Interstate Tax-Exempt Fund, the California Municipal Money-Market Fund, the Connecticut Municipal Money-Market Fund, the Florida Municipal Money-Market Fund, the Michigan Municipal Money-Market Fund, the New Jersey Municipal Money-Market Fund, the Ohio Municipal Money-Market Fund, the Pennsylvania Municipal Money-Market Fund and the Virginia Municipal Money-Market Fund; Reserve New York Municipal Money-Market Trust on behalf of the New York Municipal Money-Market Fund; and Reserve Short-Term Investment Trust on behalf of the Reserve Yield Plus Fund l. SEC Release No. IC-28466. See also New York Times (investor frustration). On October 31st, Bloomberg reported Reserve Management Corp. has begun sending redemption checks to retail Reserve Primary Fund shareholders. Checks.

• IARD System Fee Waiver Announced.

On October 30th, the SEC and the North American Securities Administrators Association announced they will waive the initial set-up and annual system fees paid by investment adviser firms to maintain the Investment Adviser Registration Depository system. Separately, NASAA announced that for next year it will also waive those system fees paid by investment adviser representatives. SEC and NASAA Joint Press Release; SEC Release No. IA-2806.

• Settled Administrative Orders Issued for Improper Gifts to Fidelity Traders.

On October 30th, the SEC instituted settled administrative proceedings against Lazard Capital Markets LLC and four of its employees for their role in spending more than $600,000 to improperly entertain traders at Fidelity Investments in an effort to generate brokerage business. The Commission's orders found that former head of Lazard's U.S. sales and trading department David L. Tashjian and former registered representatives Robert A. Ward and W. Daniel Williams facilitated the securities laws violations of Thomas H. Bruderman, a Fidelity trader, by taking him on trips, often by private plane, and paying for his meals and lodging. Bruderman also was provided with race car driving lessons, adult entertainment and expensive wine, and approximately $50,000 towards his bachelor party. The Commission also found that Tashjian and Louis Gregory Rice, former head of Lazard Capital Markets' U.S. equity sales and trading desk, failed to supervise Ward and Williams during their misconduct. Lazard consented to the order without admitting or denying the findings, agreeing to be censured and pay disgorgement of $1,817,629 plus prejudgment interest of $429,379.04, and a penalty of $600,000. Tashjian, Rice, Ward, and Williams also settled the SEC's charges without admitting or denying the allegations. Tashjian, Ward, and Williams, who were ordered to cease from committing or causing any further violations, will pay penalties of $75,000, $50,000 and $25,000, respectively, and will be suspended from associating with a broker, dealer or investment company for nine months, six months and three months, respectively. For his supervisory lapses, Rice was ordered to pay a $60,000 penalty and be suspended for a period of six months from associating in a supervisory capacity with any broker or dealer. SEC Press Release.

• SEC Holds Roundtable on Fair Value Accounting.

On October 29th, the SEC held a roundtable discussion on fair value accounting. See Cox Remarks. Reuters reported some of the comments made during the discussion. Comments.

• Director, Division of Investment Management, Addresses National Regulatory Services Compliance Conference.

On October 29th, Andrew J. Donohue, Director Division of Investment Management, discussed Division initiatives relevant to compliance during this period of financial instability. The Division will not recommend enforcement action against a money market fund where an affiliated person of the money market fund, such as a bank holding company, purchases asset-backed commercial paper from the fund at the amortized cost value of the commercial paper to enable the fund to participate in the asset-backed commercial paper program of the Federal Reserve Bank of Boston; with respect to "senior security" issues, where a money market fund participates in the U.S. Treasury's temporary guarantee program that guarantees fund shareholders will receive $1 per share; and where the money market funds uses "shadow pricing" procedures for certain portfolio securities by reference to their amortized cost value rather than using available market quotations for debt securities with remaining maturities of 60 days or less. Donohue also discussed the need for investment advisers to disclose conflicts of interest; the Division's examination of the investment adviser books and records rule, and recommendations to the Commission for updating it; and the "Director Outreach Initiative." Donohue Remarks.

• SEC to Vote on New Rules for Credit Raters.

On October 29th, Reuters reported the SEC will vote on new regulations for credit rating agencies within the next few weeks. Credit Raters.

• NYSE Regulation Advises of Report Card Compliance Release.

On October 31st, NYSE Regulation advised that its Division of Market Surveillance will implement the second release of the Front End System Capture Report Cards for monitoring compliance with NYSE Rule 123(e) and (f). This second release of the FESC Report Cards will be available to all Member Organizations. NYSE Regulation Information Memo 08-55.

• Firm Element Advisory Available.

On October 30th, the Financial Industry Regulatory Authority advised firms of the availability of the fourth-quarter 2008 Securities Industry/Regulatory Council on Continuing Education Firm Element Advisory which identifies regulatory and sales practice topics that firms should consider in their Firm Element training plans. FINRA Regulatory Notice 08-63.

• FINRA Fines Broker for Supervisory Failures.

On October 29th, the Financial Industry Regulatory Authority announced it has imposed a $250,000 fine against J.P. Turner & Company, LLC for failing to have an adequate supervisory system designed to ensure that its registered representatives charged customers fair and reasonable commissions on stock trades. In concluding this settlement, J.P. Turner neither admitted nor denied the charges, but consented to the entry of FINRA's findings. FINRA Press Release.

• FINRA Limits Submissions in Closed Cases.

On October 24th, the Financial Industry Regulatory Authority announced that effective November 24, 2008, it will limit the circumstances under which parties may make submissions to arbitrators in closed cases. FINRA Regulatory Notice 08-62.

• Court Holds that Method of Hedging Commodity Risk is not Patentable.

On October 30th, the Federal Circuit, en banc, rejected a patent application for a method of hedging risk in commodities trading. After holding that the machine-or-transformation test is the correct manner to determine whether a process claim is patent-eligible, the Court found that the process here does not transform any article to a different state or thing and is not patent-eligible subject matter. In re Bilski.

• Court Holds Attorneys May Be Liable for Securities Fraud for Statements Made to Third Parties.

On October 27th, the Ninth Circuit held that attorneys may be liable under Section 10(b) for statements made to third parties. It further held that plaintiff alleged sufficient facts to survive a motion to dismiss. Plaintiff alleged defendants, attorneys for her former employer, made misleading statements to plaintiff during settlement discussions in a related lawsuit. Plaintiff allegedly relied upon those statements in agreeing to accept the former employer's stock as part of a settlement agreement. Thompson v. Paul.

• PCAOB Names Standing Advisory Group Members.

On October 30th, the PCAOB announced the members of the Standing Advisory Group for the 2009-2010 term. PCAOB Press Release.

• FASB Proposals Could Eliminate Securitizations Market.

On October 24th, CFO.com reported that the practical effect of proposed changes to FAS 140, which would eliminate qualified special purpose entities, and FIN 46(R), which would impose stronger criteria on when banks may transfer ownership of securitizations, would be the closure of the asset-backed securities industry. Consequences.