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Board of Governors
of the Federal Reserve System
Commodity Futures Trading Commission
Federal Deposit Insurance Corporation
Office of Comptroller of the Currency
Securities and
Exchange Commission
Federal
Regulatory Agencies Announce Coordination of Reviews for Certain Foreign Funds
under “Volcker Rule”
Five
federal financial regulatory agencies today announced that they are coordinating
their respective reviews of the treatment of certain foreign funds under section
619 of the Dodd-Frank Act, commonly known as the Volcker Rule, and the
agencies’ implementing regulations.
These
foreign funds are investment funds organized and offered outside of the United
States that are excluded from the definition of “covered fund” under the
agencies’ implementing regulations (“foreign excluded funds”). Section 619, and the implementing
regulations, generally do not apply to investments in, or sponsorship of, these
foreign excluded funds by a foreign banking entity.
However,
complexities in the statute and the implementing regulations may result in
certain foreign excluded funds becoming subject to regulation under section 619
because of governance arrangements with or investments by a foreign bank. As a result, a number of foreign banking
entities, foreign government officials, and other market participants have
expressed concern about possible unintended consequences and extraterritorial
impact.
The
staff of the agencies are considering ways in which the implementing regulations
may be amended, or other appropriate action may be taken. It may also be the case that congressional
action is necessary to fully address the issue.
To aid full consideration, the federal banking regulators, which
generally oversee foreign banks, announced that they would not take action
under section 619 for qualifying foreign excluded funds, subject to certain
conditions, for a period of one year.
Section
619 generally prohibits insured depository institutions and any company
affiliated with an insured depository institution from engaging in proprietary
trading and from acquiring or retaining ownership interests in, sponsoring, or
having certain relationships with a covered fund. These prohibitions are subject to a number of
statutory exemptions, restrictions, and definitions.
Final
regulations implementing section 619 were previously issued by five
agencies--the Federal Reserve Board, the Commodity Futures Trading Commission,
the Federal Deposit Insurance Corporation, the Office of the Comptroller of the
Currency, and the Securities and Exchange Commission.
Today’s
announcement does not otherwise modify the rules implementing section 619 and
is limited to certain foreign excluded funds that may be subject to the Volcker
Rule and implementing regulations due to their relationships with or
investments by foreign banking entities.
Media Contacts
Federal Reserve Eric Kollig 202-452-2955
CFTC Erica
Elliott Richardson 202-418-5382
FDIC David
Barr 202-898-6992
OCC Stephanie
Collins 202-649-6870
SEC Office
of Public Affairs 202-551-4120
(FDIC:
PR-56-2017)
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