"Brevity is the soul of wit"

-- William Shakespeare, Hamlet

This is our last issue for calendar 2013 as we focus on juggling end of the year work loads with the winter holidays. We hopeyou look forward to our next issue, the first of Volume 9, currently scheduled for Monday, January 6, 2014.

Last week, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of Currency, and the Securities Exchange Commission (collectively the "Agencies") released the final rule ("Final Rule") that implements the Volcker Rule. The Final Rule can be found here and will be effective April 1, 2014.
Formally titled "Prohibitions and Restrictions on Proprietary Trading and Certain Investments In, and Relationships with, Hedge Funds and Private Equity Funds," the Final Rule is the collective product of the Agencies' effort to implement Section 13 of the Bank Holding Company Act (which was adopted by way of Section 619 of the Dodd-Frank Act, commonly referred to as the "Volcker Rule"). For those who are confused by naming conventions, there is good reason. Former Chairman Volcker's eponymous Volcker Rule is actually a reference to Section 619 of the Dodd-Frank Act, hence the statute is commonly referred to as a "rule," while the rules to implement a statute have the banal name "Final Rule."
Generally, Section 13 of the Bank Holding Company Act prohibits any banking entity from engaging in proprietary trading or from having an ownership interest in or sponsoring hedge funds and private equity funds (or "covered funds"). In the words of the Agencies, "[t]he Agencies have designed the [F]inal [R]ule to achieve the purposes of Section 13 of the BHC Act, which include prohibiting banking entities from engaging in proprietary trading or acquiring or retaining an ownership interest in, or having certain relationships with, a covered fund, while permitting banking entities to continue to provide, and to manage and limit the risks associated with providing, client-oriented financial services that are critical to capital generation for businesses of all sizes, households and individuals, and that facilitate liquid markets." With such an ambitious and formidable agenda, it's a wonder the Agencies have kept this tome to just under 1,000 pages. If Section 13 is called the Volcker Rule, an apt name for the Final Rule, one that perhaps does a better job of alluding to the potential magnitude of its impact on the industry, might just be Chairman Volcker's nickname, "Tall Paul." See Paul Volcker.
In the coming weeks, you can expect a serious client briefing discussing the Final Rule. In the meantime, see  The Volcker Rule below for more information and links to press releases and fact sheets from the Agencies.