Volcker Rule Exemption
On July 9, 2019, five federal agencies (the Board of Directors of the Federal Reserve System, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission) finalized a rule implementing sections 203 and 204 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) which was signed into law on May 24, 2018. The Act modifies specific provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to ease some of the regulatory burdens on financial institutions.
Section 203 creates an exemption to Section 619 of Dodd-Frank, commonly referred to as the Volcker Rule, from prohibitions on proprietary trading – owning and trading securities for the bank’s portfolio for direct market gain – and from having certain relationships with a hedge fund or private equity fund. This exemption applies to banks with less than $10 billion in total consolidated assets, and trading assets and trading liabilities less than 5% of total consolidated assets.
Section 204 eases Volcker Rule restrictions for all bank entities, regardless of size, related to sharing a name with hedge funds and private equity funds for which the bank entity is an investment adviser.
The rule takes effect upon publication in the Federal Register.
For the full text of the Act please click here.