UNITED STATES: Agencies Propose Changes to Modify “Covered Funds” Restrictions of Volcker Rule

Monday February 3 2020

On 30^th January 2020, five federal financial regulatory agencies invited public comment on a proposal to modify regulations implementing the Volcker rule’s general prohibition on banking entities investing in or sponsoring hedge funds or private equity funds – known as “covered funds.”

Since the regulations implementing the Volcker rule were finalized in 2013, the rule has created compliance uncertainty and imposed limits on certain banking services and activities that the Volcker rule was not intended to restrict.

To address these concerns, the agencies simplified requirements for the proprietary trading restrictions in November 2019.  The proposal would modify the restrictions for banking entities investing in, sponsoring, or having certain relationships with covered funds.

The joint agency proposal would improve and streamline the covered funds portion of the rule, address the treatment of certain foreign funds, and permit banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker rule was intended to address.

The proposed changes were jointly developed by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.

Comments for this proposed rule to modify regulations implementing the Volcker rule’s general prohibition on banking entities investing in or sponsoring hedge funds or private equity funds will be accepted until April 1, 2020.

Click on the above link for further information.