Action Line Update

SEC Approves FICC Rule Proposal on Repo Substitution Deadline: The Fixed Income Clearing Corporation recently announced that the Securities and Exchange Commission ("SEC") has approved its rule change to add a final deadline of 1:00 p.m. (EST) to the repo collateral substitution process of the Government Securities Division. This new deadline will be implemented on trade date, Monday, June 4, 2007. The GSD's rules currently provide that repo collateral substitution requests for which the notification itself or the information regarding new securities collateral is received after 12:30 p.m.(EST) will be processed by the GSD on a good faith basis only. Starting June 4, 2007 the GSD will establish a final deadline of 1:00 p.m. (EST), after which FICC will not process a repo collateral substitution until the following business day. Members will be required to resubmit their substitution information on the following business day for processing. Please contact Robert Toomey at 646.637.9224 with any questions or comments.

Under Secretary Steel to Deliver Remarks on US Capital Markets:: For full story see Government and Federal Agency Markets Issues section.

Under Secretary Steel to Discuss Domestic Finance Priorities:: For full story see Government and Federal Agency Markets Issues section.

Treasury Market Practices Group Conference: For full story see Government and Federal Agency Markets Issues section.

Under Secretary Steel to Deliver Remarks on U.S. Capital Markets: U.S. Treasury Under Secretary for Domestic Finance Robert K. Steel will deliver remarks before the Manhattan Institute's Conference on Capital Markets on Thursday, April 26 in New York City. The Under Secretary will discuss issues surrounding the competitiveness of U.S. capital markets. If you have any questions or comments, contact Robert Toomey at 646.637.9224.

Treasury Large Position Report Seminar:: Treasury announced that it is offering a free Large Position Report Workshop. The course will provide a brief overview of the large position reporting (LPR) rules and examples of how certain transactions are treated in the LPR calculation. Two sessions will be offered at May 18, 2007, 1:00 - 2:30 P.M.; and May 18, 2007, 3:00 - 4:30 P.M. at the Federal Reserve Bank of New York (33 Liberty Street, Room 143, New York, NY 10045). If you have any questions or comments, contact Robert Toomey at 646.637.9224.

Treasury Issues Primary Dealer Questions for Quarterly Refunding: The Treasury Department's Primary Dealer Questions for its May, 2007 Quarterly Refunding are available. Treasury is looking for dealer feedback on recent press reports and other anecdotal evidence that suggest elevated levels of secondary market trading of Treasury securities in the first quarter of 2007. If you have any questions or comments please contact Robert Toomey at 646.637.9224.

Minutes of the Federal Open Market Committee: The Federal Reserve Board and the Federal Open Market Committee on Wednesday released the minutes of the Committee meeting held on March 20-21, 2007. Noted in the minutes was the Committee's vote to seek conditions in reserve markets consistent with maintaining the federal funds rate at an average of around 5-1/4 percent.

Under Secretary Steel to Discuss Domestic Finance Priorities: U.S. Treasury Under Secretary for Domestic Finance, Robert K. Steel, will give luncheon remarks before the Exchequer Club in Washington, D.C. Wednesday, April 18. The Under Secretary will discuss Treasury's domestic finance agenda, including capital markets competitiveness, government sponsored enterprise reform and other issues critical to U.S. capital markets, financial institutions and federal finance.

Treasury Market Practices Group Conference: The Treasury Market Practices Group is hosting a conference on Thursday, June 14, 2007 from 8:30 a.m. to 12:30 p.m. at the Federal Reserve Bank of New York in New York City. Speakers at the event will provide guidance and information on applying best practice principles in the Treasury cash, repo and related markets. The conference will feature remarks by Anthony Ryan, Assistant Secretary for Financial Markets at the U.S. Department of the Treasury, and Tom Wipf, Chairman of the TMPG. All market participants - dealers, brokers, investment funds and foreign central banks - are encouraged to attend. Registration deadline is Tuesday, June 12, 2007. If you have any questions or comments please please contact Robert Toomey at 646.637.9224.

Senate Holds Hearing on Subprime Lending and Securitization: On April 17, 2007 the Senate Committee on Banking, Housing and Urban Affairs held a hearing entitled, "Subprime Mortgage Market Turmoil: Examining the Role of Securitization," which featured testimony from representatives of rating agencies, investment banks and two law professors. Please click here for the witness list and prepared testimony.

Senator Dodd Holds Homeownership Preservation Summit: On April 18, 2007 Senator Christopher Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs, convened a closed-door meeting of subprime mortgage lenders, securitizers, and servicers, as well as consumer and civil rights groups and regulators, to discuss ideas pertaining to recent issues in the subprime mortgage market. Dodd asked participants to agree that foreclosures are at an unacceptably high level and that foreclosures are not in the interests of homeowners, their communities, or those in the mortgage finance industry. Summit participants were asked to continue to discuss what steps can be taken to preserve homeownership and to keep Senator Dodd apprised of their progress. Please click here for more information.

Federal Regulators Issue Joint Statement on Working With Mortgage Borrowers: On April 17, 2007 the federal bank, thrift and credit union regulatory agencies released a statement encouraging financial institutions to work with homeowners who are unable to make mortgage payments. The statement notes that institutions will not face regulatory penalties if they pursue reasonable workout arrangements with borrowers and that borrowers who are unable to make their mortgage payments should contact their lender or servicer as soon as possible to discuss available options. Please click here for the statement and here for more information.

House Holds Hearing on FHA Reform: The House Financial Services Committee held a hearing on April 19, 2007 entitled "The Expanding American Homeownership Act of 2007: H.R. 1852 and Related FHA Modernization Issues" featuring testimony from representatives of the Department of Housing and Urban Development, the Mortgage Bankers Association and other industry participants. Please click here for a list of witnesses and prepared testimony.

U.S. Supreme Court Rules Against State Regulation of Non-bank Subsidiaries of National Banks: On April 17, 2007 the U.S. Supreme Court ruled in favor of Wachovia in the case of Linda Watters, Commissioner of the Michigan Office of Insurance and Financial Services, v. Wachovia Bank regarding the regulation of state-chartered affiliates of national banks by individual states, which was heard by the Supreme Court on November 29, 2006. The decision, reached in a 5-3 vote, affirms the preemptive status of OCC regulations over state regulations for national banks and their operating subsidiaries and states that "Wachovia's mortgage business, whether conducted by the bank itself or through the bank's operating subsidiary, is subject to OCC's superintendence, and not to the licensing, reporting, and visitorial regimes of the several States in which the subsidiary operates." Please click here for the opinion issued by the Supreme Court.

Federal Regulatory Agencies Announce Availability of 2006 HMDA Data: On April 12, 2007 the federal bank, credit union, and thrift supervisory agencies, along with the Department of Housing and Urban Development, announced the availability of the 2006 home loan data disclosed under the Home Mortgage Disclosure Act (HMDA). Lenders are required to make this data available to the public within thirty days after receiving a request, in the form of a Loan Application Register, after removing certain information to protect the privacy of applicants and borrowers. Summary statistical reports for each ender and an aggregate report for each Metropolitan Statistical Area will be released in September by the FFIEC. Please click here for more information.

Supreme Court Upholds Preemption in Watters v. Wachovia Decision: On April 17 the Supreme Court issued its decision for the Watters v. Wachovia Bank, N.A case. The decision, reached in a 5-3 vote, affirms the preemptive status of OCC regulations over state regulations for national banks and their operating subsidiaries. The opinion of the Court stated that "state regulators cannot interfere with the "business of banking" by subjecting national banks or their OCC-licensed operating subsidiaries to multiple audits and surveillance under rival oversight regimes." The decision is available here.

SIFMA Comments Incorporated into Final NJ Pay to Play Regulations: The NJ Election Law Enforcement Commission (NJ ELEC) recently released the adoption notice of its revised pay to play regulations entitled: Disclosure of Contributions by Business Entities. SIFMA had submitted comments to the NJ ELEC which were taken into account and the final law included changes that narrowed the definition of "officer" to apply only to those with senior management responsibility, not to all "vice presidents". If you have any questions, please contact Leslie Norwood at 646.637.9230.

Municipal Division Executive Committee Luncheon Meeting: A Luncheon Meeting of the Municipal Executive Committee has been scheduled on May 8, 2007 at 12 Noon at "21" Club, 21 West 52nd Street, New York, NY 10019. If you have any questions, please contact Leslie Norwood

SIFMA Responds to IOSCO Consultation Report on Implementation of Code of Conduct for Credit Rating Agencies: SIFMA submitted a comment letter in response to IOSCO's consultation on implementation of the IOSCO Code of Conduct Fundamentals for Credit Rating Agencies (CRAs), in which the Association provided IOSCO with feedback on day-to-day implementation by the larger CRAs of IOSCO's Code of Conduct and broadly welcomed IOSCO's proposed clarifications to the Code of Conduct.

IOSCO Communiqué Concerning 2007 Annual Conference: The International Organization of Securities Commissions (IOSCO) has released a communiqué concerning the 2007 IOSCO annual conference which took place in Mumbai from April 9-12, 2007. The communiqué provides an update of IOSCO's latest work on issues such as: (i) the regulation of market intermediaries and secondary markets; (ii) disclosure and accounting; (iii) investment management; and (iv) credit rating agencies.

EU Commission Launches Call for Evidence on EU Private Placement Regime: Following its commitment set out in the November 2006 White Paper on EU investment funds to undertake a systemic analysis of national barriers to private placement, the EU Commission has launched a call for evidence seeking comments on the necessity and feasibility of a European private placement regime. The call for evidence is divided into sections addressing (i) the economic relevance of private placement; (ii) the appropriate parameters of a possible private placement regime, in terms of the boundary between public offering and private placement, eligible participants and enforcement issues; and (iii) whether and, if so, how a private placement regime could be established at EU level. Comments are invited by June 30, 2007.

IOSCO Publishes Survey Report on Unconsolidated Special Purpose Entities: Following the identification in its 2005 report, entitled "Strengthening Capital Markets against Financial Fraud", of complex corporate structures and unconsolidated special purpose entities having been involved in recent financial scandals, IOSCO has published a survey report on the use of unconsolidated special purpose entities. The report contains the results of a survey, conducted by the Standing Committee on Multinational Disclosure and Accounting (SC1), of the current accounting and non-financial statement disclosure requirements applicable to the use of such entities in member jurisdictions of the Technical Committee and SC1, as well as the level of audit assurance required for this information.

FSA Action for Complaints Handling Failures: The Financial Services Authority (FSA) has imposed a fine of GBP 330,000 on Sesame Limited for breaches of Principle 2 (skill, care and diligence) and Principle 6 (a firm must pay due regard to the interests of its customers and treat them fairly) of the FSA's Principles for Businesses and for breaches of rules applicable to complaints handling. The FSA found that Sesame had incorrectly rejected complaints concerning Structured Capital At Risk Products (SCARPs) from approximately 350 customers. Factors influencing the FSA's action and the size of the penalty included the fact that the issue was identified by the FSA as a result of thematic work, and was not brought to the FSA's attention by Sesame, and also that Sesame undertook a prompt review of the complaints and paid compensation to customers where the complaints handling process was inadequate and the original SCARP was mis-sold. The final notice also refers to a "Dear CEO" letter published on April 4, 2002 concerning mortgage endowment complaints handling and suggests that this has a more general application to determining the standard to be applied for all complaints handling. The decision was made using the FSA's settlement process, although no discount was given for early settlement.

CESR Publishes Extract of Enforcement Decisions Taken by Supervisors of Financial Information in Europe: The Committee of European Securities Regulators (CESR) has published an extract from its database of enforcement decisions taken by supervisors of financial information in Europe in order to inform market participants about the accounting treatments such supervisors may consider as complying with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS). CESR intends to publish extracts of these decisions on a regular basis in order to promote a consistent application of IFRS and IAS in the EU.

French Ministry of Economy Publishes Ordinance Implementing MiFID: The French Ministére de l'économie, des finances et de l'industrie has published in the Journal Officiel Ordinance No. 2007-544, which implements the provisions of the Markets in Financial Instruments Directive (MiFID) that fall within the scope of its powers. This coincides with the March 2007 consultation by the Autorité des marchés financiers (AMF) on draft provisions which will replace the current provisions set out in Book V of the AMF General Regulations (Règlement Général) relating to market infrastructure, implementing part of MiFID in France. The Ordinance will come into force on November 1, 2007.