Morgan Lewis on Securities
Winter 2005

In this Issue:

• Securities Offering Reform:
  The Securities and Exchange Commission issued proposals to significantly change aspects of the registration and offering process under the Securities Act of 1933. The proposed revisions should eliminate some restrictions on offerings, provide more timely investment information to investors without delaying the offering process and integrate the disclosures and processes under the Securities Act of 1933 and the Securities Exchange Act of 1934.
• Hedge Fund Update:
  On October 26, 2004, the Securities and Exchange Commission adopted new Rule 203(b)(3)-2 and certain other rule amendments under the Investment Advisers Act of 1940, as amended (the “Act”). The new rule and amendments (collectively, the “New Rules”) require hedge fund managers and other advisers to certain private investment companies exempt from registration under the Investment Company Act of 1940, as amended, to register with the SEC under the Act.
• SEC Administrative Proceedings in FY 2004:
  Fiscal year 2004 saw the continuing impact of the SEC’s new rules on the timeliness of administrative proceedings (APs), as well as a return — after a one-year hiatus — of the administrative law judges’ willingness to dismiss APs that fail to pass muster at hearing.
• Enforcement Procedures in the UK:
  It has long been recognised that the Securities and Exchange Commission in the United States is an enforcement-led regulator. Indeed, after the Worldcom and Enron scandals, when the SEC determined that a strong response was required, it brought more than 1,300 enforcement actions and obtained orders for penalties and disgorgements totalling a record $5 billion in just two fiscal years, 2002 and 2003.
• Enforcing a Fund's Prohibition Against Market Timing:
  Since September 2003, the New York State Attorney General, the SEC and the NASD have taken steps to address market timing and related abuses. For the most part, however,
  these actions have been focused on mutual funds, investment advisers, and selling brokerdealers. One recently reported NASD enforcement action is noteworthy, not so much for the content of the allegations regarding market timing, but rather because the respondent was the principal underwriter — or mutual fund distributor.
• Morgan Lewis News & Calendar of Events

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