Securities and Exchange Commission 2006 – Federal Register Recent Federal Regulation Documents

On May 19, 2004, the Agencies issued and requested comment on a proposed Interagency Statement on Sound Practices Concerning Complex Structured Finance Activities (``Initial Statement'') of national banks, state banks, bank holding companies, Federal and state savings associations, savings and loan holding companies, U.S. branches and agencies of foreign banks, and SEC registered broker-dealers and investment advisers (collectively, ``financial institutions'' or ``institutions''). The Initial Statement described some of the internal controls and risk management procedures that may help financial institutions identify, manage, and address the heightened reputational and legal risks that may arise from certain complex structured finance transactions (``CSFTs''). After reviewing the comments received on the Initial Statement, the Agencies are requesting comment on a revised proposed interagency statement (``Revised Statement''). The Revised Statement has been modified in numerous respects to address issues and concerns raised by commenters, clarify the purpose, scope and effect of the statement, and make the statement more principles-based. These changes include reorganizing and streamlining the document to reduce redundancies and to focus the statement on those CSFTs that may pose heightened levels of legal or reputational risk to the relevant institution (referred to as ``elevated risk CSFTs''). In addition, the Agencies have modified the examples of transactions that may present elevated risk to make these examples more risk-focused, and have recognized more explicitly that an institution's review and approval process for elevated risk CSFTs should be commensurate with, and focus on, the potential risks presented by the transaction to the institution. As discussed below, the Revised Statement will not affect or apply to the vast majority of small financial institutions, nor does it create any private rights of action.

The Securities and Exchange Commission (Commission) is amending its description of the duties of the General Counsel to include preliminary investigations, in which no process is issued or testimony compelled, where it appears that an attorney appearing and practicing before the Commission may have violated Rule 102(e) of the Commission's Rules of Practice. The Office of the General Counsel of the Commission already has the authority to conduct Commission- authorized proceedings and formal investigations under Section 21 of the Securities Exchange Act of 1934 (Exchange Act), including for violations by attorneys of Rule 102(e) of the Commission's Rules of Practice. An amendment of the description of the duties of the General Counsel to include preliminary investigations makes it clear that the General Counsel may gather evidence in Rule 102(e) cases without compulsory process where witnesses are willing to testify or provide information voluntarily. This amendment would enable the General Counsel to identify, through informal means, those matters that do not warrant full-blown investigation and compulsory process.