Background on the Final Rule -
On December 10, 2013, the Board of Governors of the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission (collectively, “Agencies”) released the final rule (“Final Rule”) implementing Section 13 of the Bank Holding Company Act (“BHCA”), as added by Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, also known as the Volcker Rule. The Volcker Rule was one of the signature reforms of the Dodd-Frank Act and has been the subject of much debate since it was first proposed in Congress. As enacted, the Volcker Rule prohibits banking entities from engaging in proprietary trading and from investing in, sponsoring, or having certain relationships with, hedge funds and private equity funds, subject to several important exemptions. The Agencies issued proposed rules to implement the Volcker Rule in October of 2011, and received more than 18,000 comments, including more than 600 unique comment letters.
The Final Rule significantly limits the trading and investing operations of banking entities, and requires banking entities engaged in permitted trading or permitted covered fund activities to establish and maintain extensive compliance programs and satisfy new reporting requirements. Although the Volcker Rule is often portrayed as directed at the largest, most complex financial institutions, the provisions of the Final Rule apply to any banking entity. Accordingly, every banking entity needs to understand the extent to which it must adhere to the compliance and reporting requirements set forth in the Final Rule.
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