Implementation of Title VII of Dodd-Frank

Transcription

1 SEC Issues Proposed Rules to Mitigate Potential Conflicts of Interest in the Operation of Security-Based Swap Clearing Agencies, Security- Based Swap Execution Facilities and Security-Based Swap Exchanges and an Interim Final Temporary Rule Regarding Reporting of Pre-Enactment Security-Based Swap Transactions SUMMARY The SEC recently issued proposed rules and an interim final temporary rule in connection with its implementation of Title VII of the Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act ). In the first action, the SEC acted upon the authority granted to it under the Dodd-Frank Act to mitigate conflicts of interest in the operation of security-based swap clearing agencies, security-based swap execution facilities and national securities exchanges or facilities thereof that post or make available for trading security-based swaps through limits on the ownership of voting equity and the exercise of voting power with respect to such entities, as well as the adoption of other structural governance requirements. In the second action, the SEC issued an interim final temporary rule establishing a reporting requirement for security-based swaps that were entered into before the date of enactment of the Dodd-Frank Act and had not expired before such date. On October 1, 2010, the CFTC took similar action with respect to conflicts of interest in the operation of derivatives clearing organizations, designated contract markets and swap execution facilities, and reporting requirements for pre-enactment swap transactions. The CFTC s proposed rules with respect to conflicts of interest are substantially similar to the SEC s proposed rules except for limitations on equity ownership by certain types of entities (regardless of whether they are members of the clearing organization in question) and the required number of independent directors. The CFTC s proposed interim final rule with respect to the reporting of pre-enactment swaps is substantially the same as the SEC s interim final temporary rule. For a discussion of the CFTC actions, please see our memorandum New York Washington, D.C. Los Angeles Palo Alto London Paris Frankfurt Tokyo Hong Kong Beijing Melbourne Sydney

2 to clients, dated October 8, 2010, entitled CFTC Issues Proposed Rule under the Dodd-Frank Act on Financial Resource Requirements for DCOs and SIDCOs, as well as a Proposed Rule to Mitigate Potential Conflicts of Interest in the Operation of DCOs, DCMs and SEFs and an Interim Final Rule Regarding Reporting of Pre-Enactment Swap Transactions. PROPOSED RULES REGARDING POTENTIAL CONFLICTS OF INTEREST IN THE OPERATION OF SECURITY-BASED SWAP CLEARING AGENCIES, SECURITY- BASED SWAP EXECUTION FACILITIES AND SECURITY-BASED SWAP EXCHANGES 1 The SEC issued proposed rules, Regulation MC, to mitigate potential conflicts of interest in the operation of clearing agencies that clear security-based swaps ( SBS Clearing Agencies ), security-based swap execution facilities ( SB SEFs ) and national securities exchanges or facilities thereof that post or make available for trading security-based swaps ( SBS Exchanges ) through conditions and structures relating to ownership, voting and governance of such entities. The proposed rules implement Section 765 of the Dodd-Frank Act, which, among other things, directs the SEC to adopt rules to mitigate conflicts of interest in connection with the interaction between security-based swap dealers and major security-based swap participants, on the one hand, and SBS Clearing Agencies, SB SEFs and SBS Exchanges, on the other hand. Section 765 also requires the SEC to mitigate conflicts of interest with respect to bank holding companies with total consolidated assets of $50 billion or more, nonbank financial companies supervised by the Board of Governors of the Federal Reserve System, 2 affiliates of such bank holding companies or nonbank financial companies, security-based swap dealers, major security-based swap participants, and persons associated with a security-based swap dealer or major security-based swap participant, on the one hand (collectively, Specified Entities ), and SBS Clearing Agencies, SB SEFs and SBS Exchanges, on the other. The Dodd-Frank Act directs the SEC to consider conflicts of interest arising from equity ownership, voting structure and other governance arrangements, and to adopt the resulting rules within 180 days after enactment of the Dodd-Frank Act. A. PERCEIVED CONFLICTS OF INTEREST In its proposal, the SEC discusses a number of conflicts of interest that it perceives in the ownership and governance of SBS Clearing Agencies, SB SEFs and SBS Exchanges. One key factor repeatedly mentioned by the SEC in its analysis is the small number of participants currently participating in the 1 2 The release proposing Regulation MC is available at In general, a nonbank financial company is a company predominately engaged in financial activities (including, if such company is organized outside of the United States, through a branch of the company in the United States), other than a bank holding company, national securities exchange, clearing agency, SB SEF, registered security-based swap data repository, board of trade designated as a contract market, derivatives clearing organization, swap execution facility or registered swap data repository. -2-

3 over-the-counter ( OTC ) market for security-based swaps. The SEC cites a study by the Office of the Comptroller of the Currency indicating that five large commercial banks represented 97% of the total banking industry notional amounts in the first quarter of With respect to SBS Clearing Agencies, the SEC identifies three key potential conflicts of interest: participants could limit access to the SBS Clearing Agency, either directly or through correspondent clearing arrangements; participants could limit the scope of products eligible for clearing at the SBS Clearing Agency, particularly if there is a strong incentive to keep a product traded in the OTC market; and participants could seek to lower risk management controls at a SBS Clearing Agency in order to reduce the amounts of collateral and liquidity they would be required to provide to the SBS Clearing Agency. In analyzing these perceived conflicts, the SEC recognizes that: participation standards are necessary to ensure sound operation of a SBS Clearing Agency; security-based swaps should only be cleared if their risks can be properly managed; and participants have a financial incentive to ensure that proper margin is collected through payments to guarantee funds, while non-participants may not have the same incentive. The SEC also discusses the likely incentives of directors elected by participants and those elected by non-participants. According to the SEC, participant-elected directors may be, on balance, more likely to favor reducing or minimizing the risk exposure of the clearing agency, which could result in reduced access, and favor reduced access in order to preserve profits that participants can earn in the OTC market. Non-participant directors, on the other hand, according to the SEC, may be on balance more likely to maximize enterprise value by expanding access to the SBS Clearing Agency. The SEC discusses the same types of conflicts with respect to SB SEFs and SBS Exchanges, but recognizes that: SB SEFs and SBS Exchanges do not pose the same level of systemic risk as SBS Clearing Agencies; and there will be fewer barriers to entry for SB SEFs and SBS Exchanges than for SBS Clearing Agencies as the former do not require contributions to a guarantee fund. However, the SEC also focuses on the obligation of exchanges to fulfill their regulatory responsibilities. The SEC expresses concern that an exchange could put its interests and those of its members ahead of its regulatory responsibilities by failing to take regulatory or enforcement action or adequately fund selfregulation. The SEC seeks to balance these competing considerations and objectives in the proposed rules. 3 Office of the Comptroller of the Currency, Quarterly Report on Bank Trading and Derivatives Activities, First Quarter

4 B. RULES APPLICABLE TO SBS CLEARING AGENCIES With respect to SBS Clearing Agencies, the proposed rules would require each such entity to choose one of two alternative limits on the ownership of voting equity and exercise of voting power. Under the first alternative: No participant in the clearing agency (i.e. any person who uses the clearing agency to clear or settle securities transactions or to transfer, pledge, lend or hypothecate securities), either alone or together with its related persons, 4 may (i) beneficially own, 5 directly or indirectly, more than 20% of any class of voting securities or other voting ownership interest in the entity, 6 (ii) directly or indirectly vote an interest in the entity exceeding 20% of the voting power of any class of securities or other ownership interest; (iii) in the aggregate with any other participants and their related persons, beneficially own, directly or indirectly, more than 40% of any class of voting securities or other voting ownership interest in the entity; or (iv) in the aggregate with any other participants and their related persons, directly or indirectly vote an interest in the entity that exceeds 40% of the voting power of any class of securities or other ownership interest. The board of directors of such clearing agency must be composed of at least 35% independent directors, 7 the nominating committee must be composed of a majority of independent directors and any other committee that has the authority to act on behalf of the board must be composed of at least 35% independent directors. 8 Under the second alternative: No participant in the clearing agency, either alone or together with its related persons, may (i) beneficially own, directly or indirectly, more than 5% of any class of voting securities or other voting ownership interest in the entity; or (ii) directly or indirectly vote an interest in the entity that exceeds 5% of the voting power of any class of securities or other ownership interest. The board of directors of such clearing agency must be composed of a majority of independent directors, the nominating committee must be composed solely of independent directors and any other committee that has the authority to act on behalf of the board must be composed of a majority of independent directors. While the SEC proposes two separate alternatives, it notes that it may consider adopting only one of the alternatives as a final rule, or may combine aspects of each proposed alternative in a single rule The definition of related persons is discussed in Section D below, Rules Applicable to SBS Clearing Agencies, SB SEFs and SBS Exchanges. Under the proposed rules, beneficially own has the same meaning as set forth in Rule 13d-3 (which attributes beneficial ownership of a security to any person who, directly or indirectly, has or shares voting power and/or investment power with respect to the security), provided that to the extent any person beneficially owns any security or other ownership interest solely because such person is a member of a group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the Exchange Act ), such person would not be deemed to beneficially own such security or interest, unless such person has the power to direct the vote of such security or interest. The proposed rules would not limit the ownership of non-voting interests in the clearing agency. The definition of independent director is discussed in Section C below, Rules Applicable to SBS Clearing Agencies, SB SEFs and SBS Exchanges. In its proposal, the SEC noted that it preliminarily believes that committees that function in a purely advisory role would not need to comply with the 35% independent director requirement. -4-

5 C. RULES APPLICABLE TO SB SEFS AND SBS EXCHANGES With respect to SB SEFs and SBS Exchanges, any such entity may not permit any participant or member, 9 either alone or together with its related persons, to beneficially own, directly or indirectly, more than 20% of any class of voting securities or other ownership interest in the entity entitled to vote; or directly or indirectly vote an interest in the entity that exceeds 20% of the voting power of any class of securities or other ownership interest of such entity. In addition, the board of directors of a SB SEF or SBS Exchange must be composed of a majority of independent directors, the nominating committee must be composed solely of independent directors and any other committee that has the authority to act on behalf of the board must be composed of a majority of independent directors. The board of directors must also establish a regulatory oversight committee, composed solely of independent directors, to assist it in minimizing actual and potential conflicts of interest, and the board must report to the SEC any recommendations of the regulatory oversight committee that the board does not adopt or implement. D. RULES APPLICABLE TO SBS CLEARING AGENCIES, SB SEFS AND SBS EXCHANGES 1. Definition of related person Under the proposed rules, as they relate to any participant in a SBS Clearing Agency or SB SEF or any member of a SBS Exchange, the term related person means: any affiliate 10 of the participant or member; any person associated with the participant or member; 9 10 Under the proposed rule, member is defined by reference to Section 3(a)(3) of the Exchange Act, which defines a member of a national securities exchange to include: (i) any natural person permitted to effect transactions on the floor of the exchange without the services of another person acting as broker, (ii) any registered broker or dealer with which such a natural person is associated, (iii) any registered broker or dealer permitted to designate as a representative such a natural person, and (iv) any other registered broker or dealer which agrees to be regulated by such exchange and with respect to which the exchange undertakes to enforce compliance with the provisions of [the Exchange Act], the rules and regulations thereunder, and its own rules. Under the proposed rule, affiliate means any person that, directly or indirectly, controls, is controlled by, or is under common control with, the person. For these purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. A person is presumed to control another person if the person: is a director, general partner or officer exercising executive responsibility (or having similar status or functions) of the person; directly or indirectly has the right to vote 25% or more of a class of voting securities or has the power to sell or direct the sale of 25% or more of a class of voting securities of the person; or in the case of a partnership, has the right to receive upon dissolution, or has contributed, 25% or more of the capital of the partnership. -5-

6 any immediate family member 11 of the participant or member, or any immediate family member of the spouse of such person, who, in each case, has the same home as the participant or member or who is a director or officer of the SBS Clearing Agency, SB SEF or SBS Exchange or any of its parents or subsidiaries; or any immediate family member of a person associated with the participant or member, or any immediate family member of the spouse of such person, who, in each case, has the same home as the person associated with the participant or member or who is a director or officer of the SBS Clearing Agency, SB SEF or SBS Exchange or any of its parents or subsidiaries. The following persons are treated for these purposes as associated with a participant or member: any partner, officer, director or branch manager of such participant or member (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with such participant or member, or any employee of such participant or member. However, with respect to participants in a SBS Clearing Agency, any person associated with such a participant whose functions are solely clerical or ministerial is not included. It is unclear why this exception does not apply to SB SEFs or SBS Exchanges. The breadth of these definitions may present issues with respect to the calculation of the ownership restrictions. For example, the inclusion of any employee in the calculation would require participants and members to monitor the equity holdings of each of their employees. 2. Definition of independent director Under the proposed rules, a director will qualify as independent only if the entity s board of directors affirmatively determines that the director does not have a material relationship with the entity, any of its affiliates, any participant in or member of the entity or any affiliate of a participant or member. Material relationship is defined as a relationship, whether compensatory or otherwise, that reasonably could affect the independent judgment or decision-making of the director. The SEC has proposed bright-line, objective independence standards similar to those used by the New York Stock Exchange for listed companies. Under these standards, a director will not qualify as independent if: the director, or an immediate family member, is, or within the past three years was, employed by or otherwise has or had a material relationship with the entity or any affiliate thereof; the director is a SB SEF or SBS Clearing Agency participant or SBS Exchange member, or within the past three years was employed by or affiliated with such a participant or member or any affiliate thereof; the director has an immediate family member that is, or within the past three years was, an executive officer of a SB SEF or SBS Clearing Agency participant or SBS Exchange member or any affiliate thereof; the director, or an immediate family member, has received during any 12-month period within the past three years payments that reasonably could affect the independent judgment or decision-making of the director from the SB SEF, SBS Clearing Agency or SBS Exchange or any affiliate thereof or from a SB SEF or SBS Clearing Agency participant or SBS Exchange member or any affiliate thereof, 11 Under the proposed rules, immediate family member means a person s spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person s home. -6-

7 other than (i) compensation for board or board committee services, (ii) compensation to an immediate family member who is not an executive officer of the SB SEF, SBS Clearing Agency or SBS Exchange or any affiliate thereof or of a SB SEF or SBS Clearing Agency participant or SBS Exchange member or any affiliate thereof, or (iii) pension and other forms of deferred compensation for prior services, not contingent on continued service; the director, or an immediate family member, is a partner in, or controlling shareholder or executive officer of, any organization to or from which the SB SEF, SBS Clearing Agency or SBS Exchange or any affiliate thereof made or received payments for property or services in the current or any of the past three full fiscal years that exceed two percent of the recipient s consolidated gross revenues for that year, other than (i) payments arising solely from investments in the SB SEF, SBS Clearing Agency or SBS Exchange or affiliate thereof or (ii) payments under non-discretionary charitable contribution matching programs; the director, or an immediate family member, is, or within the past three years was, employed as an executive officer of another entity where any executive officers of the SB SEF, SBS Clearing Agency or SBS Exchange in question serve on the compensation committee; the director, or an immediate family member, is a current partner of the outside auditor of the SB SEF, SBS Clearing Agency or SBS Exchange or any affiliate thereof, or was a partner or employee of the outside auditor of the SB SEF, SBS Clearing Agency or SBS Exchange or any affiliate thereof who worked on the audit of the entity or any affiliate thereof, at any time within the past three years; or in the case of a director that is a member of the audit committee, such director (other than in his or her capacity as a member of the audit committee, the board, or any other board committee), accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the SB SEF, SBS Clearing Agency or SBS Exchange or any affiliate thereof or a SB SEF or SBS Clearing Agency participant or SBS Exchange member or any affiliate thereof, other than fixed amounts of pension and other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service. These bright-line standards are extremely broad in that they pick up relationships with any participant in a SB SEF or SBS Clearing Agency or any member of a SBS Exchange. This breadth may effectively preclude any current or former financial industry employee from qualifying as an independent director. 3. Other provisions applicable to SBS Clearing Agencies, SB SEFs and SBS Exchanges Each SBS Clearing Agency, SB SEF and SBS Exchange must have rules reasonably designed not to give effect to the portion of any voting interest held by participants or members in excess of the relevant limitations. The rules must also provide effective mechanisms: to obtain information relating to voting interests held by participants or members and their related parties; and to divest any participant or member of any voting interest owned in excess of the relevant limitations. Lastly, the disciplinary processes of such entities must preclude any group or class of persons that is a participant in or member of the entity from dominating or exercising disproportionate influence on the disciplinary process, any disciplinary panel must include at least one person who would qualify as an independent director and any committee of the board to which an appeal may be made must also include at least one person who would qualify as an independent director. -7-

8 4. Exemptive Authority The proposing release notes that, pursuant to Section 36 of the Exchange Act, the SEC may grant an exemption from any rule or any provision of the conflict of interest rules described above. Such an exemption could be subject to conditions, and generally would be considered only if the SEC views the exemption as necessary or appropriate in the public interest and consistent with the protection of investors. E. COMPARISON OF PROPOSED SEC RULES WITH CFTC S PROPOSED RULES FOR DERIVATIVES CLEARING ORGANIZATIONS, DESIGNATED CONTRACT MARKETS AND SWAP EXECUTION FACILITIES On October 1, 2010, the CFTC issued proposed rules for mitigating conflicts of interest in the operation of derivatives clearing organizations ( DCOs ), designated contract markets ( DCMs ) and swap execution facilities ( SEFs ). The CFTC s proposed rules differ in the following important ways from the SEC s proposed rules: Under the first alternative set of ownership limitations applicable to DCOs, enumerated entities, 12 regardless of whether they are DCO members, together with their related entities, may not collectively (i) beneficially own more than 40% of any class of voting equity interest in a DCO or (ii) directly or indirectly vote an interest exceeding 40% of the voting power of any class of equity interest of the DCO. Under the second alternative set of ownership limitations applicable to DCOs, no enumerated entity, regardless of whether it is a DCO member, may beneficially own more than 5% of any class of voting equity in the DCO or directly or indirectly vote an interest that exceeds 5% of the voting power of any class of equity interest in the DCO. The analogous alternative limitations in the SEC s proposed rules apply only to participants in the SBS Clearing Agency in question. If one or more Specified Entities are not participants in the SBS Clearing Agency, then the extent of their ownership interest is not limited by the SEC s proposed rules. Under the CFTC s proposed rules, DCOs, DCMs and SEFs are required to have at least 35%, but no less than two, public directors, which are the equivalent of independent directors under the SEC s proposed rules. Under the SEC s proposed rules, the boards of SB SEFs and SBS Exchanges and, in some cases, SBS Clearing Agencies, must have a majority of independent directors. F. SEC REQUEST FOR COMMENT The SEC has requested comments on all aspects of the proposed rules, including the structural limitations, corporate governance requirements and related definitions. The SEC has also requested comments on the conflicts of interest it has identified, including comments on the effects the identified conflicts may have, whether some conflicts deserve more attention than others, how the market for security-based swaps may evolve over time and what effects such evolution may have on the consideration of conflicts of interest, and how increased competition in this market may mitigate conflicts of interest. The comment period will expire 30 days after the publication of the proposed rules in the Federal Register, which is expected imminently. 12 Enumerated entities are bank holding companies with total consolidated assets of $50 billion or more, nonbank financial companies supervised by the Board of Governors of the Federal Reserve System, affiliates of such bank holding companies or nonbank financial companies, swap dealers, major swap participants, and persons associated with a swap dealer or major swap participant. -8-

9 INTERIM FINAL TEMPORARY RULE REGARDING REPORTING OF PRE-ENACTMENT SECURITY-BASED SWAP TRANSACTIONS 13 The SEC issued an interim final temporary rule that establishes a future reporting requirement for security-based swaps entered into before the date of enactment of the Dodd-Frank Act (i.e., before July 21, 2010) the terms of which had not expired by such date ( Pre-Enactment Unexpired Security-Based Swaps ). Section 766 of the Dodd-Frank Act added new Section 13A to the Exchange Act, requiring that Pre-Enactment Unexpired Security-Based Swaps be reported to a registered security-based swap repository or the SEC. The interim final temporary rule, Rule 13Aa-2T, requires that Pre-Enactment Unexpired Security-Based Swaps be reported, either to a registered security-based swap data repository or the SEC, within 60 days after a registered security-based swap data repository commences operations to receive and maintain data concerning such security-based swaps or by the compliance date to be established by the SEC in permanent reporting rules, whichever occurs first. The information required to be reported is: a copy of the transaction confirmation, in electronic form, if available, or in written form, if there is no electronic copy; and the time, if available, the transaction was executed. In addition, during the time that the interim final temporary rule is in effect, a counterparty to a Pre- Enactment Unexpired Security-Based Swap is required to report to the SEC upon request any information relating to such Pre-Enactment Unexpired Security-Based Swap. Pursuant to the interim final temporary rule, the following counterparty to a Pre-Enactment Unexpired Security-Based Swap is responsible to report the applicable information: with respect to a security-based swap in which only one counterparty is a security-based swap dealer or major security-based swap participant, that entity; with respect to a security-based swap in which one counterparty is a security-based swap dealer and the other counterparty is a major security-based swap participant, the security-based swap dealer; and with respect to any other security-based swap, the party whom the counterparties select. In anticipation of reporting, the interim final temporary rule establishes that each counterparty to a Pre- Enactment Unexpired Security-Based Swap should retain all information and documents, if available, to the extent and in such form as they currently exist, relating to the terms of a pre-enactment securitybased swap transaction, including but not limited to: any information necessary to identify and value the transaction; the date and time of execution of the transaction; 13 The release adopting the interim final temporary rule is available at -9-

10 all information from which the price of the transaction was derived; 14 whether the transaction was accepted for clearing by any clearing agency or derivatives clearing organization and, if so, the identity of such clearing agency or derivatives clearing organization; any modification(s) to the terms of the transaction; and the final confirmation of the transaction. This new rule does not require the creation of new records with respect to a Pre-Enactment Unexpired Security-Based Swap. While the interim final temporary rule does not address the reporting of securitybased swaps entered into after July 21, 2010, the SEC notes that these swaps will be required to be reported to the SEC or a security-based swap repository at such time as the SEC may prescribe by rule. The SEC notes that it may require similar information for post-enactment security-based swaps as is required for Pre-Enactment Unexpired Security-Based Swaps. Thus, clients should begin collecting and retaining for post-enactment security-based swaps the same information as is required for Pre-Enactment Unexpired Security-Based Swaps. The interim final temporary rule will become effective upon publication in the Federal Register, which is expected imminently, and will remain in effect until the operative date of the SEC s permanent recordkeeping and reporting rules for security-based swaps or January 12, 2012, whichever occurs first. The SEC will accept comments on the interim final temporary rule for a period of 60 days after its publication in the Federal Register. * * * Copyright Sullivan & Cromwell LLP The release adopting the interim final temporary rule indicates that this information would include, among other things, the quoting convention (for example, the economic spread, which is variously referred to as the traded spread, quote spread or composite spread, expressed as a number of basis points per annum, for CDS transactions, or the LIBOR-based Floating Rate Payment, expressed as a floating rate plus a fixed number of basis points multiplied by the notional amount, for equity or loan total return swaps). (footnote omitted.) -10-

11 ABOUT SULLIVAN & CROMWELL LLP Sullivan & Cromwell LLP is a global law firm that advises on major domestic and cross-border M&A, finance, corporate and real estate transactions, significant litigation and corporate investigations, and complex restructuring, regulatory, tax and estate planning matters. Founded in 1879, Sullivan & Cromwell LLP has more than 700 lawyers on four continents, with four offices in the United States, including its headquarters in New York, three offices in Europe, two in Australia and three in Asia. CONTACTING SULLIVAN & CROMWELL LLP This publication is provided by Sullivan & Cromwell LLP as a service to clients and colleagues. The information contained in this publication should not be construed as legal advice. Questions regarding the matters discussed in this publication may be directed to any of our lawyers listed below, or to any other Sullivan & Cromwell LLP lawyer with whom you have consulted in the past on similar matters. If you have not received this publication directly from us, you may obtain a copy of any past or future related publications from Jennifer Rish ( ; rishj@sullcrom.com) or Alison Alifano ( ; alifanoa@sullcrom.com) in our New York office. CONTACTS New York David J. Gilberg gilbergd@sullcrom.com Anthony D. Greco grecoa@sullcrom.com David B. Harms harmsd@sullcrom.com Kenneth M. Raisler raislerk@sullcrom.com Robert W. Reeder III reederr@sullcrom.com Sam B. Sellers sellerss@sullcrom.com Frederick Wertheim wertheimf@sullcrom.com Washington, D.C. Eric A. Froman fromane@sullcrom.com Eric J. Kadel, Jr kadelej@sullcrom.com Robert S. Risoleo risoleor@sullcrom.com Dennis C. Sullivan sullivand@sullcrom.com Los Angeles Patrick S. Brown brownp@sullcrom.com Alison S. Ressler resslera@sullcrom.com NY12528: B -11-