SEC Adopts Temporary Rule Requiring Money Market Fund Portfolio Holdings And Valuation Information To Be Reported To The SEC Under Certain Circumstances

Developments Of Note

SEC Adopts Temporary Rule Requiring Money Market Fund Portfolio

Holdings And Valuation Information To Be Reported To The SEC Under

Certain Circumstances

FDIC Announces Winning Bidder In Legacy Loans Program Pilot

Sale

SEC Votes to Propose Ban On Flash Orders

NYSE Proposes Amendments To Listed Company Governance

Requirements

SEC Takes Additional Action On Credit Rating Agency

Regulation

FRB Adopts Program Under Which It Will Issue Compliance Ratings

To Nonbank Subsidiaries Of Bank Holding Companies And Foreign

Banking Organizations

Other Item Of Note

SEC And UK FSA Discuss Approaches To Global Regulation Of Hedge

Funds And Their Advisers

DEVELOPMENTS OF NOTE

SEC Adopts Temporary Rule Requiring Money Market Fund Portfolio

Holdings And Valuation Information To Be Reported To The SEC Under

Certain Circumstances

The SEC has adopted Rule 30b1-6T under the Investment Company

Act of 1940 (the "1940 Act") as an interim final

temporary rule, to require a money market fund to report portfolio

holdings and valuation information under certain circumstances.

Specifically, the rule requires a money market fund whose share

price calculated using market-based prices of the fund's

portfolio holdings, commonly known as its "shadow price,"

is less than 99.75% of its stable share price on a business day (a

"report date") to notify the SEC of such fact by the next

business day, and file with such notification a schedule of the

fund's portfolio holdings and valuation information as of the

report date. The rule also requires that until the fund's

shadow price is 99.75% of, or greater than, its stable share price,

the fund must file with the SEC a schedule of its portfolio

holdings and valuation information as of the end of each week by

the close of the second business day of the following week.

The information required by Rule 30b1-6T is similar to the

information that would be required by proposed Form N-MFP, which

together with proposed Rule 30b1-6 under the 1940 Act, was proposed

by the SEC in connection with the SEC's recent proposed

amendments to Rule 2a-7 under the 1940 Act. Those amendments are

discussed in the

July 7, 2009 Alert. Proposed Rule 30b1-6, if adopted

as proposed, would require all money market funds to file Form

N-MFP monthly. The information also is similar to the information

required of certain participants in the Treasury's Temporary

Guarantee Program for Money Market Funds, which expired on

September 18, 2008. That program is discussed in the

September 30, 2008 Alert and

October 14, 2008 Alert.

Rule 30b1-6T is effective as of September 18, 2009 and expires

on September 17, 2010. The SEC is accepting comments on the rule

through October 26, 2009.

FDIC Announces Winning Bidder In Legacy Loans Program Pilot

Sale

The FDIC announced that it has signed a bid confirmation letter

with Residential Credit Solutions ("RCS"), the winning

bidder in a pilot sale of receivership assets that the FDIC

conducted to test the funding mechanism for the Legacy Loans

Program (the "LLP"). The LLP is part of the

Public-Private Investment Program ("PPIP") announced in

March 2009 by the Secretary of the Treasury, the FRB, and the FDIC,

and is being developed to help banks remove troubled loans and

other assets from their balance sheets. For more on the PPIP,

please see the

March 24, 2009 Alert. The transaction involves loans

formerly held by Houston-based Franklin Bank SSB

("Franklin"), which failed in November 2008. Under the

terms of the transaction, the FDIC will set up a limited liability

company (the "LLC") and convey to it a portfolio of

Franklin's home loans with an unpaid balance of $1.3 billion.

In return, the FDIC will take a note for $727,770,000 from the LLC,

which it will guarantee in its corporate capacity. The FDIC

anticipated that it will sell the note, which will have a 4.25%

coupon funded by the cash flow from the mortgage portfolio, at a

future date. The FDIC will keep a 50% equity stake in the LLC, and

will sell the other 50% stake to RCS, which will pay just over $64

million in cash. After the closing, which is expected to occur

before the end of September 2009, RCS will manage the portfolio and

service the loans under the Home Affordable Modification Program

guidelines. The FDIC stated that, based on its analysis and

assumptions, the present value of this bid equals 70.63% of the

outstanding principal balance of this portfolio. The FDIC called

the transaction a test case that could be replicated soon, possibly

in connection with another bank failure. The FDIC also stated that

it will analyze the results of this test sale to determine whether

the LLP can be used to remove troubled assets from the balance

sheets of open banks.

SEC Votes To Propose Ban On Flash Orders

At its open meeting on September 17, 2009, the SEC voted to

propose a ban on flash orders by amending Rule 602 of Regulation

NMS to eliminate the exception that permits them. The proposed rule

would effectively ban the use of flash orders by US equity and

options exchanges by eliminating the "immediate execution or

withdrawal" exception Rule 602 under Regulation NMS.

Flash Orders. Flash orders generally

are marketable limit orders for exchange listed equities or options

that, upon arrival at an exchange or ATS, are first permitted to

interact immediately with all available contra side trading

interest at the exchange or ATS that receives the order, and then,

if the exchange or ATS does not have sufficient available trading

interest at the NBBO to fully execute the flash order upon arrival,

the exchange or ATS flashes the order to its market participants at

the market-wide best bid or offer (the "NBBO") for the

security. The market participants who are given the opportunity to

see the flashed order are given a very short amount of time

(normally less...