The Federal Reserve, the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), the Federal Deposit Insurance Commission (FDIC), and the Office of Comptroller of Currency (OCC) all announced they were coordinating their respective reviews of how certain funds would be treated under the Volcker Rule – known formally as § 619 (12 U.S.C. § 1851), part of the Dodd–Frank Wall Street Reform and Consumer Protection Act that forbids banks from so-called proprietary trading.
The SEC enforces securities law, the CFTC regulates derivatives, the FDIC insures bank deposits, and the OCC charters, regulates, and supervises all national banks and federal savings associations as well as the federal branches and agencies of foreign banks.
The joint press release from the five federal agencies stated that 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.”
The press release went on to explain that “Section 619 [of Dodd-Frank] 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.”
The Volcker Rule has emerged as the most contentious regulation in financial services.
The Financial Choice Act, which passed out of the House but is stalled in the Senate, would repeal the Volcker Rule; but for now, the rule is still the law of the land, so regulation continues.