Risk.net August 15, 2011 The Swap Execution Facility Clarification Act, introduced to the US Congress on July 19 by Republican congressman Scott Garrett calls for restraint in rulemaking directed at swap execution facilities at the risk of "driving the swaps market to our foreign competitors simply because regulators have resisted providing the methods of swap execution that market participants require". Among other requirements, the Act would prohibit the CFTC and SEC from interpreting the SEF definition to require a minimum number of participants to receive or respond to quote requests, or

NFA News August 12, 2011 NFA has issued a Decision imposing a $2,000,000 monetary sanction against Forex Capital Markets LLC (FXCM) in settlement of a Complaint issued by NFA's Business Conduct Committee on August 12, 2011. The Complaint cited FXCM for retaining gains derived from asymmetrical positive price slippage; failing to adopt or carry out adequate procedures to ensure the efficient execution of all customer orders; failing to treat all customers equally when giving price adjustments; failing to adequately investigate suspicious activity in several customers' accounts; and - together

Ashland v. Morgan Stanley & Co., Inc., No. 10-1549-cv, slip op. (2d Cir. July 28, 2011) July 28, 2011 The Court of Appeals for the Second Circuit affirmed the dismissal of a complaint against a broker-dealer that alleged fraud through the misrepresentation of the liquidity of certain auction rate securities at a time when the broker-dealer allegedly knew the market was collapsing. The court, Judge Winter writing, found that "sophisticated" investors such as the chemical company plaintiff in the case, "cannot plead reasonable reliance on the . . . alleged misrepresentations in light of [the

FINRA AWC Letter No. 2008013231502 August 9, 2011 FINRA announced a $500,000 against a broker-dealer for failing to supervise a registered sales assistant who, over an eight year period, misappropriated nearly $750,000 from customers. The release alleges that the broker-dealer failed to investigate a series of "red flags" that should have put it on notice as to the sales assistant's improper conduct. Cross References FINRA News Release (Aug. 9, 2011) NASD Rules 2110, 3010, 3110

76 FR XXX August 9, 2011 The SEC declared immediately effective a FINRA proposal to extend the effective date of its trading halt pilot through January 31, 2012 (separate orders were issued extending similar rules at national securities exchanges). The pilot was jointly developed by the SROs and provides them with the authority to halt trading in certain securities under times of "extraordinary volatility." Cross References FINRA Rule 6121.01 SEC Release No. 34-62251 (approving FINRA rule) SEC Release No. 34-64735 (extending FINRA pilot to all NMS stocks)