Yesterday, the Federal Reserve Board (“Fed”) announced that it was granting a partial one-year extension of the Volcker Rule’s1 pending July 21, 2015 compliance deadline and said that it would grant an identical extension again next year.2 The extensions apply to the “covered funds” side of the Volcker Rule and give all banking entities until July 21, 2017 (the “Extended Deadline”) to conform any investments in, or relationships with, hedge funds and private equity funds to the requirements of the Volcker Rule, provided the investment or relationship was in place as of Dec. 31, 2013.3

Accordingly, the Extended Deadline does not affect the deadline as it pertains to any investments made, or relationships entered into, during 2014 or later. Such activities and investments still need to be conformed to the Volcker Rule or divested by July 21, 2015, at which time any new nonconforming investments or activities will also be prohibited.

While granting the Extended Deadline, the Fed made a point of reminding banking entities that they must not simply wait until the last minute to start taking action to comply with the Volcker Rule. Instead, banking entities must currently be engaged in good-faith efforts to develop and implement a detailed conformance plan to achieve full compliance with the Volcker Rule by the applicable deadlines. For example, in its order, the Fed stressed that:

banking entities are expected to make plans well in advance of the end of the extended conformance period regarding how they will conform or divest legacy covered fund investments in an orderly and safe and sound manner. Banking entities are encouraged to take steps to divest covered funds or conform such funds to the statute and final rule during the extended conformance period.