This Summary, which draws from a wide range of sources, endeavors to condense important investment management regulatory news of the preceding week into one, easily digestible source. This Summary is not intended as legal advice. Readers should not act upon information contained in this Summary without professional legal counsel. This Summary may be considered advertising under the rules of the Supreme Judicial Court of Massachusetts.
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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
Investment Company Institute (“ICI”) Files Amicus Brief in a Class Action Seeking to Avoid Preemption by the Securities Litigation Uniform Standards Act (“SLUSA”)
July 25, 2008 8:56 AM
The ICI has filed an amicus brief in a class action in Illinois state court in which the plaintiffs are seeking to avoid preemption by SLUSA. SLUSA establishes uniform standards for securities class actions and preempts state class actions alleging fraud relating to the sale or purchase of securities. The class action currently being litigated in Illinois involves allegations of negligence and recklessness by investment advisers in failing to prevent abusive market timing. The plaintiffs contend that the action is not preempted by SLUSA because it alleges negligence and recklessness rather than fraud. The state trial court has denied a defense motion to dismiss based on SLUSA preemption but has certified the issue to the Appellate Court of Illinois. The ICI has filed an amicus brief with the Appellate Court regarding the importance of SLUSA’s protections against frivolous and abusive lawsuits. The ICI contends that SLUSA should be read to preempt those state class actions that allege negligence and recklessness and should not be limited to preempting only those cases that expressly allege fraud.
Division of Investment Management Issues No-Action Letters Regarding the Purchase of a Fund’s Shares by an Affiliated Fund, Approval of a Sub-Adviser and Other Matters
July 25, 2008 8:48 AM
In a no-action letter, dated July 10, 2008, the Division of Investment Management has agreed that it would not recommend enforcement action to the SEC under Section 17(a) of the Investment Company Act of 1940 if a fund (the “Purchasing Fund”) invested in shares of an affiliated fund (the “Purchased Fund”) without obtaining an exemptive order. In this case, the funds were not members of the same fund family, but were affiliated because the sub-adviser of the Purchasing Fund was the adviser of the Purchased Fund. From the Purchased Fund’s perspective, Section 17(a) clearly permitted it to issue its shares to and redeem them from the Purchasing Fund; however, from the Purchasing Fund’s perspective, its ability to invest in shares of the Purchased Fund under Section 17 was not as clear. Accordingly, the staff agreed not to recommend enforcement action if the Purchasing Fund invested in shares of the Purchased Fund for cash on the same terms as other investors.
In a no-action letter, dated July 11, 2008, the Division has agreed that it would not recommend enforcement action under Section 15(a) of the Investment Company Act against a fund, its adviser or its new sub-adviser if the adviser retained a new sub-adviser on an interim basis for a fund before obtaining shareholder approval. Although Rule 15a-4 under the Investment Company Act permits an adviser or sub-adviser to be appointed on an interim basis before shareholder approval when a contract is terminated by the fund’s board or its shareholders, by a failure to renew the contract, or by an assignment of the contract, the rule was not applicable because the sub-advisory contract was being terminated due to the former sub-adviser’s exercise of a termination option. As noted in the no-action request, the fund would hold a shareholder meeting to approve a new sub-advisory contract with a new sub-adviser within 150 days of the termination of the sub-advisory contract.
On July 14, 2008, the Division issued a no-action letter that replaced its March 16, 2008 no-action letter to JP Morgan Chase. The replacement letter includes a reference to American Century Companies, Inc.,/JP Morgan & Co.,Inc., SEC No-Act. Ltr. (Dec. 23, 1997) instead of the reference in the original letter to Dean Witter, Discover & Co.; Morgan Stanley Group Inc., SEC No-Act. Ltr. (Apr.18, 1997), thereby clarifying the analytical basis for the original no-action letter. The replacement letter also makes other non-substantive changes to the original letter.
For more information, see the SEC No-Action Letters, which may be found at: http://www.sec.gov/divisions/investment/noaction/2008/troweprice071008-17a.pdf; http://www.sec.gov/divisions/investment/noaction/2008/firsttrustgallatin071108-15a.pdf; and http://www.sec.gov/divisions/investment/noaction/2008/jpmorgan071408-15a.pdf.
Division of Investment Management Issues Interpretive Letter Regarding Application of the Cash Solicitation Rule to Solicitation Payments by Fund Managers
July 25, 2008 8:46 AM
In an interpretive letter, dated July 15, 2008, the SEC’s Division of Investment Management has clarified that Rule 206(4)-3 under the Investment Advisers Act of 1940, commonly known as the “cash solicitation rule,” generally does not apply to cash payments made by managers of pooled investment vehicles solely to solicit investments in those funds. The cash solicitation rule prohibits a registered adviser from paying a cash fee, whether directly or indirectly, to a solicitor for solicitation activities, unless the payments are made in compliance with the specific conditions identified in the rule. These conditions include, for example, maintaining a written solicitation agreement and providing each prospective investor with a separate written disclosure document regarding the solicitation arrangement. In this letter, the Division indicates that these conditions do not apply when an adviser makes cash payments to solicitors solely to compensate them for soliciting investors to invest in privately managed investment pools which the adviser manages. To determine whether payments are made solely to compensate a solicitor for soliciting investors in a private fund so that the cash solicitation rule will be inapplicable, the adviser should evaluate: (i) the nature of the arrangement between the soliciting/referring person and the investment adviser; (ii) the nature of the relationship between the adviser and the solicited/referred person; and (iii) the purpose of the adviser’s cash payment to the soliciting/referring person. This letter supersedes several no-action letters where the staff appeared to take a contrary position. Those letters had long been criticized by many private practitioners as being inconsistent with the terms of the rule and the Advisers Act generally.
Division of Trading and Markets Releases FAQs Regarding Recent Naked Short Selling Emergency Order
July 25, 2008 8:44 AM
On the night of July 18, 2008, the SEC’s Division of Trading and Markets released answers to frequently asked questions regarding its recent naked short selling emergency order, as amended, discussed in the WilmerHale Investment Management Industry News Summary, dated July 18, 2008. The emergency order is designed to prevent naked short selling in the securities of Fannie Mae, Freddie Mac and 17 other financial services companies.
The FAQs provide clarification regarding a number of topics. For example, the Division indicates that an “arrangement to borrow” must be a bona fide agreement such that the security being borrowed is set aside at the time of the arrangement solely for the person requesting the security. The Division also confirms that, as permitted under Regulation SHO, a person effecting a short sale on behalf of a customer may rely on the customer’s representation that the customer has arranged to borrow the security from another source. In addition, the Division clarifies that the emergency order applies to any short sale transaction in publicly traded securities of the designated companies if the trade is agreed to in the United States, even if the trade is booked overseas. The FAQs also address the application of the emergency order to options exercises and assignments, re-applying a borrow for intra-day buy-to-cover trades, and the interaction with Rule 15c3-3(b) of the Securities Exchange Act of 1934.
The emergency order and the FAQs may be found at http://www.sec.gov/rules/other/2008/34-58166.pdf; http://sec.gov/rules/other/2008/34-58190.pdf; and http://sec.gov/divisions/marketreg/emordershortsalesfaq.htm. For more information, please contact any WilmerHale Investment Management lawyer listed below.
OCIE Releases New Compliance Alert Identifying Common Deficiencies by Investment Advisers and Broker-Dealers
July 25, 2008 8:42 AM
On July 22, 2008, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) released a letter to chief compliance officers summarizing select common deficiencies the staff has seen during examinations of investment advisers and broker-dealers over the past year. This is the second annual summary of this type provided by OCIE. It is designed to encourage advisers and broker-dealers to bolster their compliance programs.
The alert also provides examples of effective policies that are being used by investment advisers and investment companies to prevent misconduct. Although the alert does not appear to set new legal standards, advisers and broker-dealers should anticipate that OCIE will focus on many of these issues in future examinations and may scrutinize policies and procedures that differ from those in the alert.
For more information, see the SEC letter, dated July, 2008, which may be found at http://www.sec.gov/about/offices/ocie/complialert0708.htm.
Task force publishes breakpoint recommendations
July 23, 2008 9:05 AM
Last January, the Chairman of the SEC requested that NASD, together with the Investment Company Institute and the Securities Industry Association, convene a task force (the “Task Force”) to recommend industry-wide changes to address errors and failures in providing breakpoint discounts to investors in connection with the purchase of mutual fund shares that carry a front-end sales load. The Task Force recently published a report of its findings and recommendations to address these errors and failures and ensure that processes are in place so that investors are provided any breakpoint discounts to which they are entitled. The Task Force’s recommendations were grouped into three categories:
1. Assessing and understanding breakpoint discounts. To address communication issues and lack of uniformity:
2. Gathering and communicating relevant information. To assist broker-dealers in communicating with investors about breakpoint opportunities and to gather the data necessary to fully deliver all appropriate breakpoint discounts:
3. Meeting challenges in processing breakpoint information. To provide for better collection and sharing of information that is necessary to ensure that an investor receives any applicable breakpoint discounts:
Report of the Joint NASD/Industry Task Force on Breakpoints, NASD (July 2003).
Executive of Investment Adviser that Leveraged Hedge Fund Assets Significantly Above Stated Limitations Sentenced to 12 Years in Prison for Fraud
July 18, 2008 9:18 AM
On July 8, 2008, Federal U.S. District Judge David D. Dowd, Jr. sentenced Mark Lay to 12 years in prison on fraud charges related to the loss of $216 million in investments in a hedge fund in which the Ohio Bureau of Workers’ Compensation was the sole investor. Lay, the founder, Chairman, Co-CEO, principal shareholder and Chief Investment Strategist of MDL Capital Management, Inc. (the investment adviser to the hedge fund), was also ordered to pay $212.9 million in restitution and a $590,000 forfeiture. Prosecutors alleged that Lay hid the amount the hedge fund was leveraged, which significantly exceeded the leverage limitations set forth in the Confidential Private Placement Memorandum of the hedge fund.
U.S. Senate Agriculture Committee Approves Three Commodity Futures Trading Commission (“CFTC”) Nominees
July 18, 2008 9:16 AM
On July 9, 2008, the Senate Committee on Agriculture, Nutrition and Forestry voted to send to the full Senate for consideration and approval the nomination of three administrative appointees to the CFTC. The nominees are: Walter Lukken to be Chairman of the CFTC; Bartholomew H. Chilton to be a Commissioner of the CFTC for a term expiring April 13, 2013; and Scott O’Malia, to be a Commissioner of the CFTC for a term expiring April 13, 2012.
SEC Names a Deputy Director, a Deputy Chief Economist, the Head of Investor Education Unit and a Deputy General Counsel
July 18, 2008 9:11 AM
In the first three weeks of July, the SEC filled several positions. First, the SEC named Daniel M. Gallagher as a Deputy Director in the agency’s Division of Trading and Markets. Mr. Gallagher served as Counsel to SEC Chairman Christopher Cox since 2007, and before that served as Counsel to Commissioner Paul S. Atkins. Second, the SEC promoted Dr. Stewart Mayhew to Deputy Chief Economist in the agency’s Office of Economic Analysis. Dr. Mayhew joined the SEC staff in 2002 as a Visiting Academic Scholar, and since 2004 has served as an Assistant Chief Economist, leading a group that provides economic analysis and support for the SEC’s Division of Investment Management, Division of Trading and Markets, and Office of Compliance Inspections and Examinations. Third, the SEC named Wayne Strumpfer to lead the investor education unit within the SEC’s recently expanded Office of Investor Education and Advocacy. Mr. Strumpfer worked most recently at the California Department of Corporations, where he was the Deputy Commissioner of Enforcement and Investor Education. He also served as the Chairman of the Investor Education Section for the North American Securities Administrators Association. Finally, the SEC named Meridith Mitchell the SEC’s Deputy General Counsel for Legal Policy and Administrative Practice. Since 2000, Ms. Mitchell served as the Principal Associate General Counsel of the SEC.
For more information, see http://sec.gov/news/press/2008/2008-129.htm; http://sec.gov/news/press/2008/2008-132.htm; http://sec.gov/news/press/2008/2008-139.htm; and http://sec.gov/news/press/2008/2008-142.htm.
Chairman Cox Gives Testimony Before U.S. Senate Committee Concerning the Recent Developments in U.S. Financial Markets and the SEC’s Responses
July 18, 2008 9:08 AM
On July 15, 2008, Chairman Christopher Cox gave testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs regarding the recent developments in U.S. financial markets and the SEC’s responses to these developments. Chairman Cox noted that the credit market crisis “began with the deterioration of mortgage origination standards and a contagion of abusive lending practices, and then spread to the capital markets through securitization.” Chairman Cox mentioned three main areas in which the SEC has acted to address this problem:
For more information, see Chairman Cox’s speech, which may be found at http://sec.gov/news/testimony/2008/ts071508cc.htm.
SEC Releases Examination Report on Credit Rating Agencies
July 18, 2008 9:06 AM
On July 8, 2008, the SEC released a report titled “Summary Report of Issues Identified in the Commission Staff’s Examination of Select Credit Rating Agencies.” This report summarizes the SEC’s examination of three credit rating agencies: Fitch Ratings, Ltd., Moody’s Investor Services, Inc. and Standard & Poor’s Rating Services. In these examinations, the SEC focused on the credit rating agencies’ activities in rating subprime residential mortgage-backed securities and collateralized debt obligations linked to subprime residential mortgage-backed securities. The SEC found a substantial increase in the number and in the complexity of mortgage-backed securities and collateralized debt obligations since 2002 and found that some of the credit rating agencies appear to have struggled with this increase. In addition, the SEC found that none of the credit rating agencies examined had specific written comprehensive procedures for rating such securities and obligations.
This report summarizes also the remedial actions that the credit rating agencies agreed to take as a result of these examinations. Finally, the report describes how the rules the SEC proposed on June 16, 2008 relating to credit rating agencies would address the various issues that were discovered during the examinations.
The report may be found at http://sec.gov/news/studies/2008/craexamination070808.pdf. For more information, see the statement issued by Chairman Christopher Cox on July 8, 2008, in which Chairman Cox discussed the report, which may be found at http://sec.gov/news/speech/2008/spch070808cc.htm, or the WilmerHale Investment News Summary, dated June 20, 2008, that discusses the proposed rules, which may be found at http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=8359.
Regulators to Examine Industry Controls Against the Manipulation of Securities Prices Through the Intentional Spread of False Information; SEC Subpoenas Hedge Fund Advisers
July 18, 2008 9:04 AM
On July 13, 2008, the SEC announced that it will immediately conduct examinations aimed at the prevention of the intentional spread of false information intended to manipulate securities prices. Examiners will focus on supervisory and compliance controls of broker-dealers and investment advisers and whether such controls are reasonable designed to prevent the intentional creation or spreading of false information intended to affect securities prices or other potentially manipulative conduct. These examinations are being undertaken with the Financial Industry Regulatory Authority, Inc. and the New York Stock Exchange Regulation, Inc.
These examination are in addition to the SEC’s investigations into alleged intentional manipulation of securities prices through rumor-mongering and abusive short selling that are underway currently and have resulted in the subpoena of over fifty hedge fund advisers. On this front, the SEC is seeking trading and communications data related to the short-selling and options trading in Bear Stearns and Lehman Brothers.
SEC Issues Emergency Order Regarding Naked Short Selling That Will Take Effect at 12:01 a.m. EDT on Monday, July 21, 2008
July 18, 2008 8:58 AM
On July 15, 2008, the SEC issued an emergency order designed to limit naked short selling in the securities of Fannie Mae, Freddie Mac and certain financial services companies. The SEC’s order, as issued on July 15, 2008, required anyone effecting a short sale in a specified security to have borrowed or arranged to borrow the security or otherwise have the security available to borrow in its inventory prior to effecting such short sale and deliver the security on settlement date. However, on July 18, 2008, the SEC issued an amendment to the emergency order. This amendment: (1) excepts certain bona fide market makers from the borrowing requirements noted above; (2) clarifies that brokers and dealers generally may use the same processes and procedures to document compliance with the order as used for compliance with Regulation SHO; (3) excepts from the order any person that effects a short sale pursuant to Rule 144 of the Securities Act of 1933; (4) excepts from the order any sale by an underwriter, or any member of a syndicate or group participating in the distribution of the specified securities, in connection with the over-allotment of securities, or any lay-off sale by such person in connection with a distribution of the specified securities through a rights or a standby underwriting commitment; and (5) excepts from the order a net syndicate short position created in connection with the distribution of the specified securities that is part of a fail to deliver position at a registered clearing agency in the specified securities if action is taken to close out the net syndicate position no longer than the 30th day after commencement of sales in the distribution.
The order will take effect at 12:01 a.m. EDT on Monday, July 21, 2008 and will terminate at 11:59 EDT on Tuesday, July 29, 2008, unless further extended by the SEC.
The securities identified in the SEC’s order (with ticker symbol) are:
For more information, see the emergency order, dated July 15, 2008, which may be found at http://www.sec.gov/rules/other/2008/34-58166.pdf and the amendment to the emergency order, dated July 18, 2008, which may be found at http://sec.gov/rules/other/2008/34-58190.pdf.
West Virginia Supreme Court of Appeals has held that the state’s attorney general may not bring an action under the state’s consumer protection laws against financial services firms
July 15, 2008 2:50 PM
The West Virginia Supreme Court of Appeals has held that the state’s attorney general may not bring an action under the state’s consumer protection laws against financial services firms relating to the firms’ research reports and allegedly undisclosed investment banking relationships. The Court noted that the consumer protection laws did not apply to the business of buying and selling securities, and concluded that the sale and distribution of research reports is “ancillary and subsidiary to the buying and selling of securities.” Therefore, the Court concluded that the consumer protection laws do not apply to the firms’ research reports.
July 11, 2008 9:50 AM
On June 27, 2008, a jury in the United States District Court of the Southern District of New York returned a verdict for Bear Stearns, the defendant, and dismissed claims brought by the plaintiff, Helen Gredd, the Chapter 11 Trustee for Manhattan Investment Fund, Ltd., a hedge fund client of Bear Stearns’ prime brokerage in the 1990s. The jury held that Bear Stearns should not be held liable for failing to discover fraud at the hedge fund, which filed bankruptcy in 2000. The jury trial followed a partial reversal by the appellate court on December 17, 2007, of a ruling by the bankruptcy court granting the plaintiff’s motion for summary judgment. The bankruptcy court ruled that transfers into the fund’s margin account at Bear Stearns could be avoided in the bankruptcy because, in that court’s view, (1) the transfers by the fund’s manager were made with “actual intent to hinder, delay or defraud the fund’s creditors” as defined by Section 548(a)(1)(A) of the Bankruptcy Code; (2) Bear Stearns was an “initial transferee” under Section 550(a) of the Bankruptcy Code; and (3) Bear Stearns failed to prove that it accepted the transfers in good faith under Section 548(e) of the Bankruptcy Code. The appellate court upheld the first two findings above but overturned the bankruptcy court’s third finding, that Bear Stearns failed to prove that it accepted the transfers in good faith. The appellate court held that a reasonable jury could find that Bear Stearns’ actions were diligent, which the court considered to be sufficient to prevail on the good faith defense. Thus, the issue of whether or not Bear Stearns acted in good faith was brought before a jury on June 16, 2008.
Plaintiffs Petition for Rehearing and Petition for Rehearing En Banc of the Decision in Jones v. Harris Associates
July 11, 2008 9:47 AM
On June 2, 2008, Plaintiffs petitioned the United States Court of Appeals for the Seventh Circuit for a rehearing and petitioned for a rehearing en banc regarding the Court of Appeals decision on May 19, 2008 in Jones v. Harris Associates, in which the Court of Appeals rejected a claim that advisory fees charged for the Oakmark family of funds were excessive and violated Section 36(b) of the Investment Company Act.
IRS Issues Guidance Addressing the Deductibility of Management Fees in Certain “Fund of Funds” Structures
July 11, 2008 9:45 AM
On July 3, 2008, the IRS issued Revenue Ruling 2008-39 regarding the deductibility, for federal income tax purposes, of management fees that are paid by an upper tier investment partnership and lower tier trading partnerships to their respective managers in a “fund of funds” structure.
U.S. Senate Confirms Three SEC Commissioner Nominees
July 11, 2008 9:42 AM
On June 27, 2008, the U.S. Senate confirmed three SEC Commissioner nominees: Republican Troy Paredes, a professor at Washington University School of Law, Democrat Elisse Walter, a senior executive with FINRA and Democrat Luis Aguilar, a partner at the law firm of McKenna Long & Aldridge. In response to these confirmations, SEC Chairman Christopher Cox stated: “The President and the Senate have given the SEC three outstanding Commissioners. I look forward to welcoming them to their important positions of leadership in the finest securities regulatory agency in the world. The SEC has laid out an ambitious agenda to improve investor protection and financial markets regulation, and a full complement of Commissioners will help us achieve those important objectives.”
FINRA to Conduct Special Election to Fill Vacant Board Seat
July 11, 2008 9:30 AM
On July 1, 2008, FINRA announced that Richard L. Goble, a member of the FINRA Board of Governors, resigned, which resignation was effective immediately. FINRA also announced that it will conduct a special election to fill Mr. Goble’s seat and will release details pertaining to that election soon. Mr. Goble had been a member of FINRA’s Board since last October after being elected by small firms as one of their three designated representatives.
SEC Proposes to Amend Rule 15a-6 under the Exchange Act
July 11, 2008 9:27 AM
On June 27, 2008, the SEC issued a proposal to amend Rule 15a-6 under the Exchange Act. Section 15(a) generally provides that, absent an exception or exemption, a broker or dealer that uses the mails or any means of interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of, any security must register with the SEC. The proposed amendments to Rule 15a-6 would, if adopted, generally expand the category of U.S. investors that foreign broker-dealers may contact for the purpose of providing research reports and soliciting securities transactions. The proposed amendments would also reduce the role U.S. registered broker-dealers must play in intermediating transactions effected by foreign broker-dealers on behalf of certain U.S. investors. At the same time, the proposed changes would preserve certain investor safeguards and protections. The SEC proposed several amendments, including the following:
Adoption of “Qualified Investor Standard”
The SEC’s proposal would eliminate the following two categories of permissible customers, with whom foreign broker-dealers may have limited contacts: “U.S. institutional investor” and “major U.S. institutional investor.” The proposed rule would replace these categories with a single category of permissible customer: “qualified investor.” The proposed amendments would give the term “qualified investor” the same meaning as set forth in Section 3(a)(54) of the Exchange Act.
This new standard would reduce the threshold asset level for institutional investors from $100 million to $25 million and would permit foreign broker-dealers to deal with natural persons with $25 million in assets. The change would raise the asset threshold from $5 million to $25 million for some investors, including employee benefit plans and certain organizations described in Section 503(c) of the Internal Revenue Code.
Provision of Reports
The SEC proposal would expand the class of investors to which the foreign broker-dealer could provide research reports directly from major U.S. institutional investors to qualified investors, subject to certain conditions.
SEC Issues Final Commission Guidance Relating to Proposed Rule Changes Filed by Self-Regulatory Organizations (“SROs”)
July 11, 2008 9:24 AM
On July 3, 2008, the SEC issued final guidance and a final rule amendment, in which it took several actions intended to facilitate more expeditious handling of proposed rule changes submitted by SROs. First, the SEC provided interpretive guidance regarding the range of proposed changes to exchange trading rules that qualify for immediate effectiveness, pursuant to Rule 19b-4(f)(6) under the Exchange Act, as not significantly affecting the protection of investors or the public interest and not imposing any significant burden on competition. The SEC anticipated that the guidance would result in exchanges filing a broader range of proposed changes to trading rules for immediate effectiveness under Rule 19b-4(f)(6). Additionally, the SEC provided guidance on proposed rule changes relating to an SRO’s minor rule violation plan and “copycat” filings relating to SRO rules other than trading rules. The guidance that relates to proposed changes to trading rules is directed at SROs that operate trading systems (i.e., the national securities exchanges). The additional guidance is applicable to all SROs, including exchanges, national securities associations, clearing agencies and the Municipal Securities Rulemaking Board. Further, the SEC adopted an amendment to Rule 200.30-3(a)(12) relating to the delegation of authority to the Director of the Division of Trading and Markets regarding the publication of proposed rule changes. Amended Rule 200.30-3(a)(12) applies with regard to all SRO rule filings.
July 11, 2008 9:21 AM
As expected, on July 1, 2008, the SEC issued simultaneously three releases that propose amendments to various rules and forms that rely on credit ratings issued by nationally recognized statistical rating organizations (“NRSROs”). The proposed amendments are designed to address concerns that the references to NRSRO ratings in SEC rules and forms may have contributed to undue reliance on NRSRO ratings by market participants. (For more information concerning these proposals, see the WilmerHale Investment Management News Summary, dated June 27, 2008, which discusses the anticipated proposals in greater detail.)