Agencies Propose Modifications to "Covered Funds" Restrictions of Volcker Rule

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Saturday, February 01. 2020

Agencies Propose Modifications to "Covered Funds" Restrictions of Volcker Rule

Five federal agencies voted on January 30th to invite public comment on a proposal that would modify regulations that govern the implementation of 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 some compliance uncertainty and also imposed limits on certain banking services and activities that the rule was not intended to restrict.

To address these concerns, the group of agencies simplified the requirements for the proprietary trading restrictions in November 2019. The new 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, as well as address the treatment of certain foreign funds. In addition, it would 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 developed by the Federal Reserve Board, the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency, and the Securities and Exchange Commission (SEC). Comments on the proposal will be accepted until April 1, 2020.

Federal Reserve	Eric Kollig	(202) 452-2955
CFTC	Office of Public Affairs	(202) 418-5080
FDIC	Julianne Fisher Breitball	(202) 898-6895
OCC	Bryan Hubbard	(202) 649-6870
SEC	Office of Public Affairs	(202) 551-4120