InfoBytes, February 11, 2011 - Weekly In-depth review of news & developments in the financial services industry


Topics In This Issue

• Federal Issues

• Firm News

• Miscellany

• Mortgages

• Banking

• Consumer Finance

• Criminal Enforcement Action

Excerpt from "Federal Issues"

Federal Reserve Board Announces Approval of Final Rule to Implement Volcker Rule’s Conformance Period Provisions. On February 9, the Federal Reserve Board of Governors (Board) announced its approval of a final rule that will implement the conformance period provisions of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Volcker Rule. The Volcker Rule generally prohibits banking entities 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. Pursuant to the conformance period provisions of the Volcker Rule, banking entities or nonbank financial companies under the Board’s supervision have a period of time after the Volcker Rule’s effective date to conform to the Rule’s prohibitions and restrictions. The Board’s final rule (i) provides a general conformance period of two years after the effective date of the Volcker Rule, (ii) allows the Board to extend that two-year period by up to three one-year periods, (iii) implements a special five-year extended transition period available for certain qualifying investments in hedge funds and private equity funds that are "illiquid funds," (iv) defines certain terms related to the conformance period, (v) specifies how an application or request for an extension should be submitted, and (vi) identifies the factors the Board may consider when evaluating such a request. The Board’s final rule is similar to the proposed rule issued in November 2010. The Board incorporated a number of changes to the final rule to address issues raised by public comments, to reduce potential regulatory burdens, and to clarify application of the final rule, which will become effective on April 1, 2011.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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