October 17, 2021

Volume XI, Number 290

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October 15, 2021

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Volcker Rule Regulators Make Changes to Covered Fund Rules

On June 25, the five regulators responsible for Section 13 of the Bank Holding Company Act of 1956 (Volcker Rule) approved a set of amendments that modify and clarify the covered fund provisions of the regulations implementing the Volcker Rule. (The five regulators are the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, and the Securities and Exchange Commission.) The final amendments are generally the same as those proposed in January of this year.

Among other things, the final rule:

  1. Limits the extraterritorial impact of the rule on foreign funds offered by foreign banks to foreign individuals.

  2. Permits certain low-risk transactions (including intraday credit and payment, clearing, and settlement transactions) between a banking entity and covered funds for which the banking entity serves as investment advisor or sponsor.

  3. Simplifies existing provisions of the rule related to foreign public funds, loan securitizations, small business investment companies and public welfare investments.

  4. Permits banking entities to invest in or sponsor certain types of funds that do not raise the concerns the Volcker Rule was intended to address, such as credit funds, venture capital funds, customer facilitation funds and family wealth management vehicles.

  5. Clarifies that credit exposures to a covered fund would generally not constitute fund ownership interests under the Volcker Rule.

  6. Clarifies the treatment of parallel investments made by a banking entity in the same underlying investments as a sponsored covered fund.

The amendments go into effect on October 1, 2020.

The amendments are available here.

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 178
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About this Author

Guy Dempsey Jr., Bank Regulations Legal Specialist, Katten Muchin
Partner

Guy C. Dempsey Jr. concentrates his practice on derivatives and structured products and on bank regulation. He advises clients on derivatives transactions of all types across all asset classes, as well as on the corporate governance, regulatory, collateral, compliance, insolvency and litigation issues associated with such products.

Much of Guy’s work involves helping bank and non-bank clients analyze the details and impact of the Dodd-Frank Act. He maintains deep knowledge of the banking laws and regulations relating to capital markets activities....

212-940-8593
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