The Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency announced that they will not take action related to restrictions under the Volcker Rule for certain foreign funds for an additional two years. The three federal banking regulatory agencies have consulted with the staffs of the Securities and Exchange Commission and the Commodity Futures Trading Commission regarding this matter.
The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds, known as “covered funds.”
Certain foreign funds that are organized and offered outside of the United States are excluded from the definition of covered fund under the agencies’ implementing regulations. However, these foreign funds could become subject to restrictions under the Volcker Rule because of governance arrangements with or investment by foreign banking entities.
The three federal bank regulatory agencies had announced in previous years that they would provide similar treatment to these funds.
For purposes of this statement, a “qualifying foreign excluded fund” means, with respect to a foreign banking entity, an entity that:
- Is organized or established outside the United States and the ownership interests of which are offered and sold solely outside the United States;
- Would be a covered fund were the entity organized or established in the United States, or is, or holds itself out as being, an entity or arrangement that raises money from investors primarily for the purpose of investing in financial instruments for resale or other disposition or otherwise trading in financial
instruments; - Would not otherwise be a banking entity except by virtue of the foreign banking entity’s acquisition or retention of an ownership interest in, or sponsorship of, the entity;
- Is established and operated as part of a bona fide asset management business; and (5) Is not operated in a manner that enables the foreign banking entity to evade the requirements of section 13 or implementing regulations.
Source: https://www.federalreserve.gov
