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Agencies propose changes to modify ‘covered funds’ restrictions of Volcker Rule

Yesterday, five federal financial regulatory agencies invited public comment on a proposal to modify regulations implementing the Volcker rule’s general prohibition on banking entities investing in or sponsoring hedge funds or private equity funds – known as “covered funds.”

Since the regulations implementing the Volcker rule were finalized in 2013, the rule has created compliance uncertainty and imposed limits on certain banking services and activities that the Volcker rule was not intended to restrict. To address these concerns, the agencies simplified requirements for the proprietary trading restrictions in November 2019. The Jan. 30 proposal would modify the restrictions for banking entities investing in, sponsoring, or having certain relationships with covered funds.

In particular, the joint agency proposal would improve and streamline the covered funds portion of the rule, address the treatment of certain foreign funds, and permit banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker rule was intended to address.

The proposed changes were jointly developed by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Securities and Exchange Commission.

See details below

Comments will be accepted until April 1.

Written by
Cara Clark
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The League of Southeastern Credit Unions & Affiliates represents 342 credit unions in Alabama, Florida and Georgia, with a combined total of $118.63 billion in assets and more than 10.1 million members. LSCU & Affiliates provides legislative and regulatory advocacy; education and training; cooperative initiatives (including financial education outreach); public messaging; information services; and business solutions.

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