Federal Agencies Release Proposed Changes to Volcker Rule "Covered Fund" Provisions
On January 30, 2020, the five federal financial regulators responsible for implementing the Volcker Rule released a joint notice of proposed rulemaking that contains a number of proposed revisions to the Volcker Rule’s 2013 implementing regulations (the “2013 Rule”). The proposal, which follows the November 2019 final amendments to the Volcker Rule’s proprietary trading and compliance program requirements, provides some clarifying amendments to the Volcker Rule’s current restrictions on sponsoring and investing in certain covered hedge funds and private equity funds, and also adds some new exemptions allowing banking entities to sponsor and invest without limit in credit funds, venture capital funds, customer facilitation funds and family wealth management vehicles. The proposal would also loosen certain other restrictions on extraterritorial fund activities and direct parallel or co-investments made alongside covered funds. If adopted, the proposal would thus modestly expand the ability of banking entities to invest in and sponsor private funds.