Earlier this month, the Office of Compliance Inspections and Examinations (the "OCIE") of the Securities and Exchange Commission (the "SEC") sent letters to newly-registered investment advisers to introduce such advisers to the National Exam Program (the "NEP") and provide information regarding the SEC's new "Presence Exam" initiative. As the letter explains, the NEP is the arm of the OCIE that administers investment adviser examinations.

The SEC's Presence Exam initiative will be undertaken over the next two years. Newly-registered firms (that is, investment advisers who have registered with the SEC in connection with the rules adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act) may be subject to Presence Exams, which the SEC describes as "conduct focused, risk-based examinations of investment advisers to private funds." The Presence Exams are intended to have a narrower focus than a traditional exam undertaken by the SEC. In particular, the Presence Exams will focus on the following high-risk areas: (i) marketing; (ii) portfolio management; (iii) conflicts of interest; (iv) safety of client assets; and (v) valuation. Following the NEP's examination of an adviser, the NEP may send the subject investment adviser a letter noting any findings made during the Presence Exam, or should the NEP staff finds serious deficiencies, it may refer the adviser and its deficiencies to the SEC's Division of Enforcement or appropriate self-regulatory organization.

While not all newly-registered investment advisers received a copy of this letter, receipt of the letter does not necessarily mean that such investment adviser will undergo a Presence Exam. Firms will be contacted separately if they are going to be subject to a Presence Exam.

In addition to explaining the Presence Exam initiative, the SEC provided information regarding its outreach efforts to inform newly-registered investment advisers of their duties and obligations under the Investment Advisers Act of 1940, as amended, and the rules thereunder. The SEC has published, among other things, compliance outreach materials, letters, studies, speeches and no-action letters, which provide guidance to registered investment advisers. An attachment to the letter contains a list of resources and links to such resources.

A copy of the letter may be found here.

• Bipartisan Letter Calls for Stricter Bank Capital Requirements.

On October 17th, The Hill reported that Senators Sherrod Brown and David Vitter, both members of the Senate Banking Committee, have written the Federal Reserve Board, Federal Deposit Insurance Company ("FDIC"), and the Office of the Comptroller of the Currency (the "OCC") urging that the banking regulators adopt capital requirements that go beyond those required by Basel III. Capital Requirements.

• Insurance Regulator Proposes Policy Measure for Systemically Important Insurers.

On October 17th, the International Association of Insurance Supervisors released its proposed policy measures for global systemically important insurers. The paper was endorsed for consultation by the Financial Stability Board. Comments should be submitted on or before December 16, 2012. IAIS press release.

• Research Analysts Return to IPO Pitch Meetings.

On October 16th, MarketWatch discussed the new Jumpstart Our Business Startups Act ("JOBS Act") rules that will allow research analysts from investment banks to attend the pitch meetings in which emerging growth companies seek underwriting support from the very same banks. IPO Rules.

• Audit Committees.

On October 16th, ComplianceWeek summarized the recommendations made by seven corporate governance groups regarding how audit committees should conduct their evaluations of external auditors. Auditing the Auditors.

• Money Market Reform.

On October 15th, Reuters reported researchers for the Federal Reserve Bank of New York have suggested money market mutual fund investors be unable to immediately redeem a small portion of their holdings. The small percentage (perhaps 5 percent) would be called a "minimum balance at risk," and might prompt investors to more closely monitor the investment of their money market funds. Market Discipline. On October 16th, Reuters summarized the findings of a U.S. Chamber of Commerce analysis of the money market reforms adopted by the Securities and Exchange Commission (the "SEC") in 2010. The analysis finds that the SEC's actions reduced risk and allowed U.S. money market funds to withstand the European debt crisis. 2010 Reforms.

• Private Fund Advisers and Dodd-Frank.

On October 15th, Businessweek summarized the results of a survey of private fund investment advisers which asked how the new registration and reporting requirements arising out of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") have affected them. Survey Says.

• Double Jeopardy.

On October 15th, Reuters reported banks may be less willing to settle state and federal investigations of their residential mortgage securitization practices, believing they are being asked to repeatedly pay for actions they had already resolved. Double Jeopardy.

• OCC Issues Stress Test Guidance for Community Banks.

On October 18th, the OCC issued a Bulletin providing guidance to national banks and federal savings associations with assets of $10 billion or less (community banks) on using stress testing to assess risk in their loan portfolios. The guidance clarifies stress testing expectations for community banks and provides an example of a simple stress test framework. The OCC expects all banks to have the capacity to analyze the potential impact of adverse outcomes on their financial condition in order to establish and support their risk appetite and tolerances, set concentration limits, adjust strategies, and appropriately plan for and maintain adequate capital levels. In addition, the OCC is making a new portfolio level stress test tool for income producing commercial real estate loans available to national banks and federal savings associations through BankNet. This optional tool was developed by OCC examiners in response to requests from community bankers for more specific guidance on how to stress test loan portfolios. OCC Press Release.

• Federal Reserve Board Names Members of Community Depository Institutions Advisory Council.

On October 18th, the Federal Reserve Board announced the members of its Community Depository Institutions Advisory Council and the president and vice president of the council for 2013. Federal Reserve Board Press Release.

• Banks Urged to Work with Borrowers Affected by Drought.

On October 16th, the Federal Financial Institutions Examination Council encouraged financial institutions to work constructively with borrowers that have been affected by drought conditions and consider alternatives for prudently restructuring credit facilities as appropriate. FFIEC Press Release.

• OCC Bulletin on Appraisal Requirements for Higher-Risk Mortgages.

On October 15th, the OCC published a Bulletin on the August 15, 2012 proposed rule jointly published by the banking regulatory agencies. The proposed rule would implement new appraisal requirements for higher-risk mortgage loans under the Truth in Lending Act.

• CFPB Proposes New Credit Card Rules.

On October 17th, the Consumer Financial Protection Bureau ("CFPB")proposed updates to existing regulations to make it easier for spouses or partners who do not work outside of the home to qualify for credit cards. The proposal would allow a stay-at-home spouse or partner to rely on shared income from his or her spouse or partner when applying for a credit card account. Comments should be submitted within 60 days after publication in the Federal Register, which is expected shortly. CFPB Press Release.

• Student Loans.

On October 16th, the CFPB Student Loan Ombudsman released a report detailing problems reported by private student loan borrowers. CFPB Press Release.

• Designations.

On October 17th, the Treasury Department announced the designation of three Pakistan-based terrorist facilitators, Maulawi Adam Khan Achekzai, Aamir Ali Chaudhry, and Qari Ayyub Bashir, pursuant to Executive Order 13224, for providing material, logistical, or financial support to the Taliban, Tehrik-e Taliban Pakistan, and the Islamic Movement of Uzbekistan, respectively. On October 18th, the Treasury Department announced the designation of Adel Radi Saqr al-Wahabi al-Harbi, a key member of an al-Qa'ida network operating in Iran and led by Iran-based al-Qa'ida facilitator Muhsin al-Fadhli. The action is taken pursuant to Executive Order 13224. Separately, the Treasury Department designated Dalene Sanders for providing support and services to Saadi Qadhafi, son of former Libyan leader Muammar Qadhafi.

• Unblocking Notices.

On October 16th, the Treasury Department's Office of Foreign Assets Control ("OFAC") published the names of two individuals and four entities whose property and interests in property have been unblocked pursuant to the Foreign Narcotics Kingpin Designation Act. Separately, OFAC published the names of 24 individuals and 6 entities whose property and interests in property have been unblocked pursuant to Executive Order 12978, Blocking Assets and Prohibiting Transactions With Significant Narcotics Traffickers.

• Adaptation of Regulations to Incorporate Swaps.

On October 16th, the Commodity Futures Trading Commission (the "CFTC") announced the approval of new final rules amending certain existing regulations to integrate them with the statutory and regulatory framework established under the Dodd-Frank Act. Specifically, the new rules amend certain definitions and recordkeeping regulations so that they apply to both futures and swaps. As an example, futures commission merchants and introducing brokers will now be required to follow recordkeeping rules for swap transactions that are equivalent to those rules they presently follow for futures transactions. The new rules are effective 60 days after publication in the Federal Register, which is expected shortly. CFTC Press Release. Reuters noted that absent from the amendments is a rule implementing the Dodd-Frank Act's provision requiring futures exchanges to record all communications leading to the execution of a transaction. The proposed rule drew sharp criticism from grain traders who feared they would be required to record every conversation with a farmer, grain buyer, or grain trader. Recording Rewind.

• Swaps Collateral and Setoffs.

On October 17th, the Division of Clearing and Risk issued an interpretation clarifying that while CFTC Regulation 22.2(d) prohibits a futures commission merchant from placing a lien on the cleared swaps customer collateral it holds, the regulation does not prohibit a cleared swaps customer from granting a lien on his or her own account at the FCM, nor does the regulation prohibit the FCM from taking action to foster the cleared swaps customer's grant of such a lien. CFTC Letter No. 12-28.

• Family Investment Entity Interpretive Letter.

On October 17th, the CFTC published the October 5, 2012 interpretive letter from the Division of Swap Dealer and Intermediary Oversight (the "DSIO") finding that a limited liability company whose members were all family members was not a commodity pool within the meaning and intent of Regulation 4.10(d)(1) and, consequently, that the managing member was not a CPO thereof. CFTC Letter No. 12-27.

• CPO Exemptive Relief.

On October 17th, the CFTC published three DSIO letters providing no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act (the "CEA"), and allowing an affiliated CPO to serve as the CPO of the pool instead, under certain conditions. CFTC Letter No. 12-23; CFTC Letter No. 12-24; CFTC Letter No. 12-25.

• Swaps Reprieve.

On October 10th, 11th and 12th, the CFTC issued a series of no-action letters and interpretations designed to give swap market participants additional time to transition to the futures market and to the agency's new swap regulations. The no-action letters are:

• Letter No. 12-10: Division of Clearing and Risk no-action letter preserving the regulatory status quo with respect to swaps cleared by derivatives clearing organizations and related collateral which expires on the compliance date for Part 22 regulations, November 8, 2012.

• Letter No. 12-11 and Letter No. 12-12: The Division of Market Oversight, the DSIO, and the Division of Clearing and Risk no-action letters preserving the regulatory status quo with respect to provisions of the CEA that may apply to certain electrical utility companies.

• Letter No. 12-13: The DSIO interpretive letter determining that equity real estate investment trusts that satisfy certain criteria are outside the definition of commodity pool as that term is defined in Section 1a(10) of the CEA and Commission Regulation 4.10(d). The requirements include deriving income primarily from the ownership and operation of real estate and using derivatives for the limited purpose of mitigating their exposure to changes in interest rates or fluctuations in currency; complying with applicable provisions of the Internal Revenue Code; and identifying itself as an equity REIT on applicable Internal Revenue Service forms. The relief is self executing.

• Letter No. 12-14: The DSIO interpretative letter excluding certain securitization vehicles from the definition of commodity pool, subject to certain conditions.

• Letter No. 12-15: The DSIO registration no-action positions. In the first position, DSIO announced that it will not recommend that the CFTC commence an enforcement action against any person who, solely by virtue of its swaps activity, would be required to register as an introducing broker, commodity pool operator, commodity trading advisor, associate person of any of the foregoing or of an futures commission merchant, floor broker or floor trader, provided that on or before December 31, 2012, the person applies for registration. In the second position, DSIO announced a similar registration no-action position for any person who finds themselves required to register solely because of their involvement with the transition of certain contracts on ICE and NYMEX to clearing as commodity futures and options, provided that on or before December 31, 2012, the person applies for registration. In the third position, DSIO announced a no-action position that will permit an SD or MSP to employ a person as an AP, notwithstanding that the person is subject to a statutory disqualification, provided that the SD or MSP requests and receives from the National Futures Association advice that, notwithstanding the disqualification, the person would have been granted registration as an AP. CFTC Press Release 6384-12
.

• Letter No. 12-16: The DSIO no-action letter providing that DSIO will not recommend that the CFTC take enforcement action against any person for failure to include, in its calculation of the aggregate gross notional amount of swaps connected with its swap dealing activity for purposes of CFTC Regulation 1.3(ggg)(4), a swap that (i) references an exempt commodity or agricultural commodity, (ii) is executed prior to December 31, 2012, and (iii) is either cleared on a derivatives clearing organization registered with the CFTC, or entered into contingent upon its being subsequently exchanged for and cleared as a futures position as part of an exchange for related position transaction conducted in accordance with a DCM's rules.

• Letter No. 12-17: The Office of General Counsel interpretive letter regarding eligible contract participant status. CFTC Press Release 6385-12.

• Letter No. 12-18: The DSIO no-action letter providing that it will not recommend that the CFTC commence an enforcement action against a non-financial entity that regularly transacts in the physical energy markets for failure to apply to be registered as a swap dealer if the entity's swaps dealing activities are no more than $800 million per year, are limited to publicly-owned, government-owned and federal agency utilities, and meet other requirements. CFTC Press Release 6386-12.

• Letter No. 12-19: The DSIO interpretive letter clarifying the scope of the bona fide hedging exemption from the trading thresholds as applied to the operators of registered investment companies pursuant to Regulation 4.5. CFTC Press Release 6387-12.

• Letter No. 12-20: The DSIO no-action letter advising that it will not recommend that the CFTC take enforcement action against any person for failure to include, in its calculation of the aggregate gross notional amount of swaps connected with its swap dealing activity for purposes of CFTC Regulation 1.3(ggg)(4), a swap that (i) references an exempt commodity or agricultural commodity, and (ii) is executed prior to October 20, 2012. The DSIO also will not recommend that the CFTC take enforcement action against any person for failure to include, in its calculation of daily average aggregate uncollateralized outward exposure and daily average aggregate potential outward exposure for purposes of CFTC Regulation 1.3(jjj)(4), such exposures arising from any swap that references an exempt commodity or agricultural commodity, from October 12, 2012, through October 20, 2012, inclusive. CFTC Press Release 6388-12.

• Letter No. 12-21: The DSIO no-action letter providing time-limited, no-action relief from the obligation to include any foreign exchange swap or foreign exchange forward for purposes of determining if a person is a major swap participant, or the calculation to determine if an entity is a swap dealer if the Secretary of the Treasury determines at a later date to exempt such swaps or forwards from the definition of the term "swap" under the CEA. The letter also provides similar temporary no-action relief, for the same time period, for persons who would meet the definitions of the terms commodity pool operator and commodity trading advisor in the CEA solely as a result of their foreign exchange swap and foreign forward activity, from registration in those capacities. CFTC Press Release 6389-12.

• Letter No. 12-22: The DSIO no-action letter providing that it will not recommend that the CFTC take enforcement action against certain foreign entities for failure to include a swap executed prior to the earlier of December 31, 2012, or the effective date of a definition of "U.S. person" in a final exemptive order, in its calculations required under the swap dealer and major swap participant definitions, so long as the counterparty to such swap does not fall within certain enumerated categories. The no-action letter also provides similar relief concerning certain swap transactions by certain foreign entities when the counterparty is a foreign branch of a person that falls within one of the enumerated categories and that intends to register as a swap dealer. See also CFTC Press Release 6390-12.

• Swaps Confusion.

On October 19th, Bloomberg discussed the swaps industry's mistaken belief that swaps trading during the phase-in period for the CFTC's new swaps rules would not need to be centrally cleared. The common misunderstanding will most likely lead the CFTC to issue some form of relief. Swaps Confusion.

• G-20 Members Concerned by Swap Rules.

On October 17th, Japan's Financial Services Agency, jointly with the U.K.'s Chancellor of the Exchequer, the European Commission, and the French Ministry for the Economy and Finance, sent a ministerial-level letter to CFTC Chairman Gary Gensler regarding the cross-border implications of U.S. swap regulations. Letter.

• MF Global Executives Re-Interviewed.

On October 17th, Reuters reported the Justice Department and CFTC have recently re-interviewed several former MF Global executives amid speculation that new evidence has emerged concerning the disappearance of customer funds. Interviews.

• Open Meeting.

The CFTC will hold an open meeting on October 25, 2012 to consider publishing for comment proposed rules on enhancing the protections afforded customers and customer funds held by futures commission merchants and derivatives clearing organizations. CFTC Press Release.

• SEC Votes to Propose Capital, Margin, and Segregation Rules for Swaps.

On October 17th, the SEC voted to publish for public comment proposed capital, margin, and segregation requirements for security-based swap dealers and major security-based swap participants. The proposed rules address the amount of capital dealers in security-based swaps must hold; when and how these dealers need to collect collateral to protect against losses from counterparties; and the method by which dealers segregate and protect funds and securities held for customers. The SEC is also proposing capital and margin requirements for major security-based swap participants. Further, the SEC will consider proposing rules to increase capital requirements for the largest broker-dealers that use internal models in calculating how much capital they need to hold. Comments should be submitted within 60 days after publication in the Federal Register, which is expected shortly. SEC Press Release. On October 19th, MarketWatch discussed the proposal's provisions that allow major swap participants to use internal value-at-risk models, and the disadvantages those models present. VAR.

• Staff Legal Bulletin on Shareholder Proposals.

On October 16th, the Division of Corporation Finance issued a staff legal bulletin regarding shareholder proposals submitted in accordance with Rule 14a-8 of the Securities Exchange Act of 1934, as amended. The bulletin contains information regarding the parties that can provide proof of ownership under Rule 14a-8(b)(2)(i) for purposes of verifying whether a beneficial owner is eligible to submit a proposal under Rule 14a-8; the manner in which companies should notify proponents of a failure to provide proof of ownership for the one-year period required under Rule 14a-8(b)(1); and the use of website references in proposals and supporting statements. Staff Legal Bulletin.

• Commissioner Aguilar Proposes Recidivist Tracking.

On October 18th, SEC Commissioner Luis A. Aguilar told the Securities Enforcement Forum that since its inception, the agency's whistleblower program has received 2,820 whistleblower tips from the U.S. and 45 other countries. Aguilar also called for the creation of a program to track recidivist securities violators. Aguilar Remarks.

• Schapiro's Tenure.

On October 18th, Bloomberg discussed SEC Chairman Mary L. Schapiro's tenure at the SEC, noting the highlights, failings, and obstacles she faced. Tenure.

• Family Offices.

On October 17th, CFA Institute discussed the SEC's rules for family offices. Family Offices.

• SEC Report on the Implementation of Organizational Reform Recommendations.

On October 17th, the SEC released the third of four reports on the SEC's implementation of an independent consultant's recommendations concerning its internal operations, structure, funding, and relationship with self-regulating organizations. The study and reports are required by the Dodd-Frank Act. Report .

• JOBS Act Study on the Enforcement of Rule 12g5-1(b)(3).

On October 16th, the SEC released its study on its ability to enforce Rule 12g5-1(b)(3). As amended by the JOBS Act, the rule generally allows issuers with fewer than 2,000 holders of record to forego complying with certain registration and disclosure requirements. The study concludes that the SEC's existing enforcement tools are adequate to enforce the rule.

• Chief Economist Discusses Role of Economics in SEC Rulemaking.

On October 17th, Craig M. Lewis, the SEC's Chief Economist and Director, Division of Risk, Strategy, and Financial Innovation, discussed the role played by economics and data analysis in the SEC's rulemaking. Lewis Remarks .

• Compliance.

On October 14th, Investment News summarized the remarks of SEC officials at a recent compliance conference. The SEC's Office of Compliance Inspections and Examinations is looking at companies' "tone at the top" and whether sufficient resources are being given to compliance operations. Compliance.

• Fact Checking Form ADV.

On October 12th, Investment News reported the SEC is checking the accuracy of investment advisers' Form ADV disclosures. Fact Checking.

• Longer Period Designated to Consider Retail Price Improvement Proposal.

On October 12th, the SEC designated November 29, 2012 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding BATS Y-Exchange's proposed Retail Price Improvement Program. SEC Release No. 34-68049.

• FINRA Announces Availability of Firm Element Advisory.

On October 19th, the Financial Industry Regulatory Authority announced that the Securities Industry/Regulatory Council on Continuing Education has released its Fall 2012 Firm Element Advisory ("FEA"). The FEA identifies regulatory and sales practice topics that firms should consider in their Firm Element training plans. FINRA Regulatory Notice 12-43. See also FINRA Information Notice.

• Nasdaq Proposes New Disclosure Requirement.

On October 15th, the SEC provided notice of the NASDAQ Stock Market's filing of a proposed rule change modifying certain disclosure requirements. The proposal would require listed companies to publicly describe the specific basis and concern identified by Nasdaq when a company does not meet a listing standard and give Nasdaq the authority to make a public announcement when a listed company fails to do so. Comments should be submitted on or before November 9, 2012. SEC Release No. 34-68053.

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

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.

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