On September 25, 2015, the US Federal Reserve Board, the OCC, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission (the "Agencies") released two new frequently asked questions on the Volcker Rule. FAQ 17 clarifies compliance requirements for market making and the identification of covered funds. FAQ 18 relates to CEO certification for prime brokerage transactions.

FAQ 17

The Volcker Rule allows for an exemption for market making-related activity under the condition that a banking entity establishes, implements, maintains and enforces a reasonably designed compliance program for a trading desk engaged in market making-related activity. In FAQ 17, the Agencies establish that for purposes of satisfying the Volcker Rule's exemption for market making, a reasonably designed compliance program may include reasonable reliance on objective factors to determine whether a security is issued by a covered fund. Additionally, the compliance program may permit a trading desk to use a shared utility or third party service provider that utilizes objective factors under certain circumstances. The Agencies do not consider reliance on either or both the name of the issuer or the title of the issuer's securities alone as conveying sufficient information to make this determination.

FAQ 18

Notwithstanding the Volcker Rule's general prohibition on banking entities engaging in covered transactions (defined in section 23A of the Federal Reserve Act) with covered funds in which they hold ownership interests or with which they have certain other relationships, Section 248.14(a)(2) of the Volcker Rule permits a banking entity to enter into any prime brokerage transaction with any covered fund in which a covered fund managed, sponsored or advised by such banking entity (or affiliate) has taken an ownership interest, subject to the satisfaction of certain conditions. These conditions include delivery of an annual written CEO certification that the banking entity does not guarantee (or otherwise insure) any obligations of the covered fund or of any covered fund in which such covered fund invests. In FAQ 18, the Agencies state that banking entities required to provide the annual certification as of the end of the conformance period should submit their first such certification no later than March 31, 2016. The conformance period for banking entities in respect of legacy covered funds is currently July 21, 2016. Accordingly, banking entities that engage in prime brokerage transactions with legacy covered funds must submit their first certification by March 31, 2017.

Going forward, banking entities should provide the requisite CEO certification within one year of the certification from the prior year, notwithstanding the duty to update the certification if there are any material changes to the information in the certification.

Volcker Rule FAQs are available at: http://www.federalreserve.gov/bankinforeg/volcker-rule/faq.htm