An update on the Federal Reserve Board's proposed rule to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that give banking firms a defined period of time to conform their activities and investments to the so-called Volcker Rule.
On November 17, 2010, the Federal Reserve Board published a proposed rule implementing the conformance period provisions for banking entities subject to the activities and investment restrictions under the Volcker Rule. The proposed rule only addresses the conformance period and does not address other aspects of the Volcker Rule which are subject to separate rulemaking requirements.Close speedread
On November 17, 2010, the Fed published a proposed rule implementing provisions under Section 619 of the Dodd-Frank Act (Volcker Rule) that give banking entities a set period of time to conform their activities and investments to the Volcker Rule requirements.
Under the Volcker Rule, banks are prohibited from engaging in proprietary trading in securities, derivatives, or certain other financial instruments, and from investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund. The Dodd-Frank Act requires that the Fed issue rules implementing the conformance periods established under the Volcker Rule. (For more on the Volcker Rule and the Dodd-Frank Act, see Practice Notes, Summary of the Dodd-Frank Act: The Volcker Rule (www.practicallaw.com/6-502-7553) and Road Map to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (www.practicallaw.com/3-502-8479).)
The proposed rule's implementation of the Volcker Rule's conformance periods includes provisions that:
Banking entities have to bring their activities and investments into compliance within two years from when the Volcker Rule prohibitions become effective.
The Fed may extend the conformance period deadline for specified periods under certain conditions described in the Volcker Rule and the proposed rule.
An additional extended time period can be provided under certain conditions for conforming investments in illiquid funds. In addition to implementing the time periods set forth under the Volcker Rule, the proposed rule defines several key terms integral to the definition of illiquid fund.
The proposed rule does not address other aspects of the Volcker Rule that are subject to separate rulemaking requirements under Section 13(b)(2) of the Bank Holding Company Act.
Comments on the proposed rule must be submitted to the Fed within 45 days after publication in the Federal Register.