Further to my Questionnaire to Maureen Bartlett at Cadwalader on the 
applicability of U.S. securities' laws in the context of a London Equities' 
Desk, I received Maureen's responses in a lengthy telephone call yesterday 
afternoon.  I shall only comment where according to Maureen we shall have to 
be mindful of an issue - where I do not comment, Maureen said the answer to 
the Question was "no" (i.e., good news for us).  Hence, Maureen's advice:-

Q 6 - Generally, ECTII would only bear responsibility to US regulatory 
authorities for EEFT's acts and omissions if ECTII was a "knowing 
co-conspirator" in an EEFT act or omission which violated US securities' 
laws.  EEFT would not have any responsibility for its acts and omissions to 
any US regulatory authority.  EEFT would not have any responsibility to US 
regulatory authorities for any acts or omissions of ECTII except again only 
to the extent that it may have colluded with ECTII.  The only exceptions to 
these positions are set out below.  

Q 7 - U.S. disclosure requirements re interests in equities - where initially 
EEFT acts as pure arranger without any discretion for ECTII (i.e., pure 
execution-only facility in London), the U.S. disclosure requirements will be 
down to ECTII to comply with (as the principal).  This will still be the case 
if EEFT moves to having agency authority (i.e., having discretion) to book 
trades to ECTII - the only difference here is that there will need to be 
extra careful monitoring to ensure that EEFT does not do a deal in a stock 
out of London which, when aggregated with other Enron Group interests in that 
stock, take us over a disclosable amount (e.g., under s 13d SEA '34, a 5 % 
holding of a stock registered under s 12 SEA '34; and 10 % under s 16a SEA 
'34).  This will mean that we shall need extra careful use and monitoring of 
Watch and Restricted Lists between London and Houston and may be London 
having a policy preventing acquisition by the London desk of a large block of 
stock (to be defined) in any U.S. entity without Houston's consent.

Q 8 + Q 9 - U.S. Insider Dealing laws apply to (a) stock of U.S. issuers and 
(b) stock of non-U.S. issuers listed in the U.S..  EEFT would not be liable 
under U.S. Insider Dealing laws unless it knew that it had price-sensitive 
information (as defined under U.S. laws) and dealt in either (a) or (b) or 
encouraged another to deal, etc.  ECTII  would not be liable vicariously to 
the US authorities for EEFT in this respect - ECTII would have to have 
committed the offence itself, e.g. by having the knowledge then dealing etc 
or colluding with EEFT.  Vice versa applies re ECTII - EEFT.  Basically this 
comes down, once again, to having adequate. and well monitored Chinese Walls, 
procedures, education of staff re what they can and cannot do etc.  As well 
as other Chinese Walls, obviously ECTII staff would not be able to pass 
price-sensitive information which is not publicly known to EEFT staff and 
vice versa.

Q 10 + 11 - Re Reg S new issues.  As ECTII would be the principal and is in 
the US, not only is ECTII directly prevented from buying a Reg S offering 
within the lock-out period but so would EEFT as ECTII's arranger / agent.  If 
EEFT purchased a Reg S offering within the lock-out period, ECTII would have 
broken the rules.  Obviously this would have to go into the compliance manual 
governing EEFT's conduct and again London trading would need to be actively 
monitored for compliance.

I still firmly believe that there is nothing in the above advice which makes 
a London equities' facility for Houston legally and technically difficult - 
it comes down to Chinese Walls, policies and procedures and active daily 
monitoring by a compliance department of the activities of the London desk.

Maureen will shortly be sending me her written confirmation of the advice 
which she gave me over the telephone.

Kind regards

Mark