Fed Adopts Final Rule for Conformity with the Volcker Rule


On Wednesday, February 9, 2011, the Board of Governors of the Federal Reserve System (the “Board”) announced its adoption of a final rule concerning the period of time that banking entities and nonbank financial companies supervised by the Board have to comply with the new section 13 (the “Volcker Rule”) of the Bank Holding Company Act of 1956 (the “BHC”), as added by Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). As enacted on July 21, 2010, the Volcker Rule generally prohibits banking entities – broadly defined to include banks, parents of banks and subsidiaries and affiliates of either of them – 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 Volcker Rule further permits the Board or other agencies to impose restrictions, such as capital charges or quantitative limits, on nonbank financial companies supervised by the Board.

The Volcker Rule will go into effect upon the earlier of (i) 12 months after the agencies issue final rules regarding section 13(b)(2) of the BHC Act and (ii) July 21, 2012. However, the Volcker Rule also provides institutions with time, after the Volcker Rule’s effective date, to conform their activities and investments to the law’s restrictions. Generally, each entity subject to the Volcker Rule is given two years to comply with it once it becomes effective, but the discussion of the availability of extensions is the most interesting aspect of the final rule. The Board’s final rule will be effective April 1, 2011. It is similar in most respects to the proposed rule issued for comment in November 2010.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

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.

© Ropes & Gray LLP | Attorney Advertising

Written by:


Ropes & Gray LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.