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Offices

  • New York

    • 919 Third Avenue
    • New York, NY 10022
    • United States of America
      • +1 212.756.2000 Phone
      • +1 212.593.5955 Fax
  • Washington, DC

    • 901 Fifteenth Street, NW, Suite 800
    • Washington, DC 20005
    • United States of America
      • +1 202.729.7470 Phone
      • +1 202.730.4520 Fax
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    • One Eagle Place
    • London SW1Y 6AF
    • United Kingdom
      • +44 (0) 20 7081 8000 Phone
      • +44 (0) 20 7081 8010 Fax

On June 25, 2020, the Federal Reserve Board (“Fed”), the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission (collectively, the “Agencies”) approved a new final rule (“Final Rule”) to simplify and tailor compliance requirements relating to section 13 of the Bank Holding Company Act, commonly known as the “Volcker Rule.”[1] A copy of the Final Rule is available at https://www.fdic.gov/news/board/2020/2020-06-25-notice-dis-a-fr.pdf.

In November 2019, the Agencies finalized certain amendments to the “proprietary trading” provisions of the Volcker Rule and stated that they would propose a separate rulemaking regarding the “covered fund” provisions. The Final Rule is the culmination of that effort. As indicated by the Fed, the Final Rule is intended to clarify and streamline the covered fund-related provisions of the regulations by:

  • Permitting banking entities to invest in or sponsor certain types of funds that do not raise the concerns the Volcker Rule was intended to address, such as credit funds, venture capital funds, customer facilitation funds and family wealth management vehicles;
  • Simplifying existing provisions of the rule related to loan securitizations, foreign public funds, small business investment companies and public welfare investments;
  • Limiting the extraterritorial impact of the Volcker Rule on foreign funds offered by foreign banks to foreign individuals;
  • Permitting certain low-risk transactions (including intraday credit and payment, clearing and settlement transactions) between a banking entity and covered funds for which the banking entity serves as investment adviser or sponsor;
  • Clarifying that credit exposures to a covered fund would generally not constitute ownership interests under the Volcker Rule; and
  • Clarifying that parallel direct investments made by a banking entity in the same underlying investments as a sponsored covered fund are not deemed to be investments in the fund itself.

The Final Rule will become effective on Oct. 1, 2020.

While the Final Rule (which spans 322 pages) is substantially similar to the proposed rule adopted by the Agencies on Jan. 30, 2020,[2] SRZ is reviewing it and will issue further Alerts, including a detailed summary of its provisions. In the meantime, if you have any questions concerning this Alert, or would like help drafting or submitting any comments, please contact your attorney at Schulte Roth & Zabel or one of the authors.

Authored by Joseph P. Vitale and Nicholas A. Wilson.


[1] The Volcker Rule was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act and restricts the proprietary trading and private investment fund activities of U.S. banks and their worldwide affiliates, as well as foreign banks with banking operations in the United States and their worldwide affiliates. Regulations implementing the Volcker Rule were finalized and jointly promulgated by the Agencies in December 2013.

[2] Please see our Feb. 6, 2020 Alert for a detailed summary of the proposed rule, available at https://www.srz.com/resources/summary-of-proposed-volcker-2-0-for-fund-activities.html.


This communication is issued by Schulte Roth & Zabel LLP for informational purposes only and does not constitute legal advice or establish an attorney-client relationship. In some jurisdictions, this publication may be considered attorney advertising. ©2020 Schulte Roth & Zabel LLP.

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