TOTAL RETURN SWAPS AND SWAP CONTRACT LITIGATION

MS. JACKSON: Let's go ahead and get started. I am going to introduce you to the moderator of the next panel. They are going to be looking at derivative sales to funds and the issues that arise, and they will probably even go beyond that. I would just like to say a few words about David Morris. He is a Partner at Fried Frank, where he is active as counsel to broker-dealers, hedge funds, and investors on deals and structures involving a variety of derivatives, repos, CMOs, and other types of derivatives, including swaps. David, I turn it over to you. DAVID MORRIS:* Thanks. There are three topics that we are going to talk about. One is the allocation of responsibility between brokers, fund managers, investors, and the funds themselves. Another topic is the significance of fund investments in illiquid securities and, in particular, illiquid collateral. There was a lot of talk this morning about the increasing importance of collateral, and we thought we would focus on illiquid collateral, in particular. And then finally, some of the effects that leverage is going to have. The paradigm case that we think about is a fund that invests in some kind of derivatives, things go swimmingly for awhile, and then things don't go swimmingly anymore, someone loses a lot of money, and then there is a lawsuit. Three of us were involved in a case, called the Askin 1 case, which ...