The case is In re Refco Inc. Securities Litigation, ---- F. Supp. 2d --- (S.D.N.Y. May 21, 2008) (Lynch, J.). Ernst & Young, one of many defendants in a complex array of parties in the Refco bankruptcy proceeding, moved to compel the Trustee to mediate and then arbitrate his claim against E&Y. According to the Trustee, E&Y had helped to prepare fraudulent income tax returns for Refco between 1991 and 2005, and thereby aided and abetted the now defunct options and commodity futures broker to exaggerate its financial performance.

E&Y's motion to compel mediation/arbitration relied primarily on a 2001 Letter of Engagement with Refco that Refco apparently received and acted upon, but did not countersign and return. Two subsequent Letters of Engagement, in 2002 and 2003, referenced an exhibit to the earlier, unsigned Letter, the "Dispute Resolution Procedures" ("DRPs"), but the DRPs were not attached to the subsequent letters.

The Court compelled arbitration anyway.  After stating that, "the threshold issue of whether E&Y and Refco reached an agreement to arbitrate is a matter for the Court, rather than for the arbitrator, to decide," Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003), the Court held that, ". . . Refco's failure to sign the 2001 Engagement Letter would not invalidate the letter's arbitration clause.  The lack of a signature on a contract does not affect its validity where the non-signing party received the contract and knowingly accepted its benefits. See Thomson-CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773, 778 (2d Cir. 1995); Deloitte Noraudit A/S v. Deloitte Haskins & Sells, 9 F.3d 1060, 1064 (2d Cir. 1993) (noting that where non-signatory "failed to object to the Agreement when it received it" and "knowingly accepted the benefits of the Agreement," that party "is estopped from denying its obligations to arbitrate under the Agreement"); see also Genesco, 815 F.2d at 846 ("[W]hile the [FAA] requires a writing, it does not require that the writing be signed by the parties."). Here, it is undisputed that Refco received a "direct benefit" from E&Y's preparation of its 2000 tax returns. Camferdam v. Ernst & Young Int'l, Inc., No. 02 Civ. 10100, 2004 WL 307292, at *5 (S.D.N.Y. Feb. 13, 2004) (internal quotations marks omitted).

The Court also compelled arbitration on the basis that the 2002 and 2003 Letters of Engagement, even without the DRPs or the particulars of  the parties' intended arbitration procedure, nonetheless manifested a joint intention to arbitrate.  "[T]o the extent that any ambiguity remains," said the Court, "federal policy requires that 'any doubts concerning the scope of the arbitrable issues  .  .  .  be resolved in favor of arbitration.'"  Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 406 U.S. 1, 24-25 (1983).

The SEC has proposed a comprehensive revision of its Rule 15a-6, to make it easier and less expensive for foreign financial service firms to provide investment research and sell securities to certain U.S. investors. This now appears as Proposed Rule Release No. 34-58047 ("Exemption of Certain Foreign Broker and Dealers [from U.S. broker-dealer registration]") (June 27, 2008).

Currently, the rule allows foreign broker-dealers to provide research to U.S. institutional investors, but requires that the solicitation of orders be "chaperoned" by a U.S. broker-dealer. The proposed rule would substantially reduce the role of the U.S. broker-dealer, would retain several of the Rule’s requirements and would modify others. Among other things, a foreign broker-dealer would be permitted to interact with U.S. institutional investors that invested $25 million or more, or with natural persons that owned or controlled investments of more than $25 million. Foreign broker-dealers are currently permitted to interact only with institutions having financial assets of over $100 million.

In place of the current requirement that a U.S. broker-dealer "chaperone" most aspects of the transaction, the proposed Rule suggest two alternatives:

The foreign broker-dealer could effect all aspects of the transaction, including the maintenance of custody over the funds and assets, provided the foreign broker-dealer made certain disclosures and conducted a "foreign business" (defined as the business of a foreign broker-dealer with qualified investors and foreign resident clients where at least 85 percent of the aggregate value of the securities purchased or sold in transactions conducted pursuant to the proposed rule by the foreign broker-dealer is derived from transactions in foreign securities). Under this approach, all books relating to the transactions would have to be maintained both by the foreign broker-dealer and by the U.S. broker-dealer.

The foreign broker-dealer could effect all aspects of a transaction with a qualified investor in both U.S. and foreign securities, provided that a U.S. registered broker-dealer maintained custody of the qualified investor's funds and securities and maintained books and records reflecting such transactions. There would be no "foreign business test" under the second approach, and the foreign broker-dealer could effect all aspects of the transactions with a qualified investor in both U.S. and foreign securities, provided a U.S. registered broker-dealer maintained custody of the qualified investor's funds and securities in connection with the transactions, along with all related books and records.

The proposed rule contains many other provisions of significance, and the SEC has allotted a 60-day period for the receipt of comments (through August 27, 2008).