Three and a half years after passage of the Dodd-Frank Act, the
much anticipated final Volcker Rule has been issued. On December
10, 2013, the federal banking regulators, the Securities and
Exchange Commission ("SEC"), and the Commodity Futures
Trading Commission ("CFTC") (collectively, the
"Agencies") issued a final rule ("Final Rule")
to implement Section 13 of the Bank Holding Company Act of 1956
("BHCA"), which was added by Section 619 of the
Dodd-Frank Act. Section 13 of the BHCA generally prohibits any
"banking entity" from engaging in "proprietary
trading" or from acquiring or retaining an "ownership
interest" in or "sponsoring" a hedge fund or private
equity fund. The Final Rule largely follows the structure of the
rule the Agencies initially proposed, but also contains several
important modifications.
The Final Rule will be effective on April 1, 2014. However, in a
separate order, the Board extended until July 21, 2015 the period
banking entities will have to conform their activities to the new
requirements, although certain new reporting requirements will
begin for the largest banking entities as early as July 2014. This
memorandum discusses the Final Rule and how it has changed from the
Proposal, and also identifies numerous interpretive issues the
Final Rule raises for banking entities and other market
participants. As banking entities continue to analyze the Final
Rule, we expect additional interpretive issues to emerge.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.