- The Announcement.
On December 10th, the Securities and Exchange Commission ("SEC"), Commodity Futures Trading Commission ("CFTC"), Federal Deposition Insurance Corporation ("FDIC"), Office of the Comptroller of the Currency ("OCC"), and Federal Reserve Board issued the final rules implementing Section 619 of the Dodd-Frank Act, commonly referred to as the "Volcker rule." The final rules prohibit insured depository institutions and companies affiliated with insured depository institutions from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account. The final rules also impose limits on banking entities' investments in, and other relationships with, hedge funds or private equity funds. As required by the Act, the final rules provide exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds. The final rules also clarify that certain activities are not prohibited, including acting as agent, broker, or custodian. The compliance requirements under the final rules vary based on the size of the banking entity and the scope of activities conducted. Those with significant trading operations will be required to establish a detailed compliance program and their CEOs will be required to attest that the program is reasonably designed to achieve compliance. Full compliance with the rules will be required by July 21, 2015. Joint Press Release.
- A Summary.
An accompanying fact sheet summarizes the regulation's salient points regarding activities exempt from the proprietary trading prohibition and the type of funds and fund activities permitted under the rules. The fact sheet also discusses the rules' compliance requirements. Fact Sheet.
Guide for Community Banks.
The Federal Reserve Board, FDIC, and OCC published a guide on how the rules apply to community banks, noting that few community banks engage in the types of activities regulated by the rules. Guide.
Related Media Reports.
The Wall Street Journal considered whether the regulations could be challenged on the basis that they fail to adequately consider the costs and benefits of the rule. Writing for Bloomberg, University of Chicago Law School Professor Eric Posner and University of Chicago assistant professor of economics engaged in a simplified cost-benefit analysis of the rule. Bloomberg compared the final version of the regulations against the draft. Reuters focused on the regulations' provisions concerning asset managers, noting that certain foreign funds, commodity pools, and securitizations will not be subject to the rules. The San Antonio Express discussed the rules effects on oil and gas exploration businesses.