New Short-Selling Emergency Rules

Just a few days ago, the SEC issued their new rules on short-selling, governing a list of (currently) nineteen financial firms. The rules can be found here, or here: http://www.sec.gov/rules/other/2008/34-58190.pdf

Wachovia Investigated Regarding Auction-Rate Securities

Missouri. Securities regulators entered the St. Louis offices of Wachovia Securities, apparently to obtain information about a type of security that they sold, called "auction-rate" securities. As noted previously in this blog, they're a type of bond with a frequently resetting interest rate.

Although auction rate securities were thought by many to be liquid assets, the fact that they are bonds prevented them from always being sold at will. The market in them has tightened considerably of late, according to Wachovia: “While some liquidity is returning to parts of the (auction-rate securities) market, many securities are not immediately salable.”

Defending Auction Rate Securities Claims

The WSJ had an article entitled Auction-Rates a Legal Tangle recently. There have been recent liquidity problems in the $330B or so market for this special type of security, and this might be leading to claims against firms in this market.

The securities were unusual in the sense that they were a means of raising money long term (actually a form of long-term bond) wherein the interest rate was reset periodically (weekly or monthly) using auctions (so the bonds acted more like short-term securities in that the interest rate could be reset or the security could be sold in the auction).

The article pointed out that the defense of claims made be made more difficult because Wall Street firms themselves often bid in the "auctions" when there were no other bidders.

Rating Agencies Involvement in Subprime Mess

The NY Times' Magazine has an article detailing the hand that Moody's, Fitch, and S&P had in helping to create problems with subprime mortgages and their derivatives. You can read it here.

The New Paulson Plan...Stay Tuned

Treasury Secretary Hank Paulson's new plan for financial regulations is an interesting one. The story is developing, but, according to BusinessWeek and Forbes, some of the highlights include merging the Office of Trift Supervision and the Commodities Futures Trading Commission into other bodies, create a national insurance regulator, and put the Federal Reserve in the primary role of market stability modulator or national risk regulator. The 22-page executive summary can be found here.

Possible Targets in Mortgage Lender Collapse: Accountants and Lawyers

The court-appointed bankruptcy examiner's report on bankrupt mortgage lender New Century is now open. According to the WSJ's analysis, some fingers may be pointed at NC's auditors, KPMG, and their law firm, O'Melveny & Myers LLP. More on this here.

SEC Proposes New Privacy Rules

Regulation S-P governs identity theft from securities customers. The SEC, several days ago, proposed a new set of rules to tighten requirements for securing customer data. They include security breach notification and an increased scope of protection for personal data. Here's law firm Goodwin Proctor's take on it.