The Federal Reserve Board on April 19 clarified that an entity covered by section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the so-called Volcker Rule, has the full two-year period provided by the statute to fully conform its activities and investments. The Board may further extend the conformance period. Section 619 generally requires banking entities to conform their activities and investments to the prohibitions and restrictions included in the statute on proprietary trading activities and on hedge fund and private equity fund activities and investments. Section 619 required the Board to adopt rules governing the conformance periods for activities and investments restricted by that section, which the Board did on February 9, 2011. As has been widely reported, the rules adopted have been criticized for being too complex, restraining otherwise non-harmful market activities, and having adverse and unintended economic effects.
"During the conformance period, banking entities should engage in good-faith planning efforts, appropriate for their activities and investments, to enable them to conform their activities and investments to the requirements of section 619 and final implementing rules by no later than the end of the conformance period." The clarification also stated that "…all proprietary trading activity conducted by each banking entity must conform to the prohibitions and requirements of section 13 of the BHC [Bank Holding Company] Act and any final implementing rules by no later than the end of the conformance period. Similarly, all activities, investments and transactions with or involving a covered fund, including a covered fund organized and offered or sponsored by the banking entity, must conform to section 13 of the BHC Act and final implementing rules by no later than the end of the relevant conformance period."
The Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission (the agencies) plan to administer their oversight of banking entities under their respective jurisdictions in accordance with the Board’s conformance rule and the attached statement. The agencies have invited public comment on a proposal to implement the Volcker Rule, but have not adopted a final rule.
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