On July 6, 2016, the US Federal Reserve Board extended until July 21, 2017, the conformance period for banking entities to divest ownership in certain legacy investment funds and terminate relationships with funds that are prohibited under section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Volcker Rule. This order formalizes the Federal Reserve Board’s December 2014 announcement that it would make this extension to provide for orderly divestitures and to prevent market disruptions.

This extension would permit banking entities additional time to divest or conform only “legacy covered fund” investments, such as prohibited investments in hedge funds and private equity funds that were made prior to December 31, 2013. This extension does not apply to investments in and relationships with a covered fund made on or after December 31, 2013, or to proprietary trading activities; banking entities were required to conform those activities to the final rule by July 21, 2015.

This is the final of the three one-year extensions that the Federal Reserve Board is authorized to grant. Additionally, upon the application of a banking entity, the Federal Reserve Board is permitted under section 619 to provide up to an additional five years to conform investments in certain illiquid funds, where the banking entity had a contractual commitment to invest in the fund as of May 1, 2010. The Federal Reserve Board expects to provide more information in the near term as to how it will address such applications.

The Federal Reserve Board order approving the extension is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160707a1.pdf