The US federal financial regulatory agencies with responsibility for implementing and enforcing Section 13 of the Bank Holding Company Act, commonly known as the Volcker Rule, have finalized amendments to the “covered fund” and “foreign excluded fund” provisions of the rule. The changes will be effective October 1, 2020. Among other things, these final amendments will:
(i) permanently exempt qualifying foreign excluded funds from being treated as “banking entities” subject to the Volcker Rule proprietary trading and covered fund investment restrictions;
(ii) establish certain limited exceptions to the “Super 23A” prohibitions, which will allow banking entities to enter into certain types of low-risk transactions with a sponsored or advised covered fund;
(iii) simplify and relax certain of the conditions and restrictions associated with several covered fund exclusions, including those for foreign public funds and loan securitizations; and
(iv) establish new covered fund exemptions for certain categories of funds, including credit funds, venture capital funds, and family wealth management vehicles.
Collectively, the changes to the Volcker Rule regulations just adopted by the agencies will result in a meaningful lessening of the Volcker Rule restrictions governing sponsorship and investments in covered funds.
We are in the process of reviewing the final rule and will be publishing a detailed LawFlash in the coming days.