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| FRS | RIN: 7100-AD58 | Publication ID: Spring 2011 |
| Title: ●Regulation Y--Conformance Period for Entities Engaged in Prohibited Proprietary Trading or Private Equity Fund or Hedge Fund Activities (Docket No. R-1397) | |
| Abstract: The Dodd-Frank Act requires that the Board alone issue rules no later than January 21, 2011, governing the period of time banking firms will be permitted to conform their activities and investments to the Volker Rule. In general, the statute and the proposed rule give banking entities and systemically important financial institutions a period of time (generally between 2 and 10 years) to bring their activities and investments into compliance with the Volker Rule's prohibitions and restrictions on proprietary trading and private fund relationships. The Volker Rule generally prohibits banking entities from:(1) Engaging in proprietary trading in securities, derivatives or certain other financial instruments; and (2) investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund. However, the statute provides several important exceptions to these prohibitions, including exceptions for market making and hedging activities. The Volker Rule also applies to firms designated as systemically important financial institutions by the Financial Stability Oversight Council. The statute, by its terms and without any action by the Board, provides a banking entity or nonbank financial company supervised by the Board an additional 2 years after July 21, 2012, (the date on which the Volker Rule's restrictions are likely to become effective) to wind down, sell, or otherwise conform its activities, investments, and relationships to the requirements of the Volker Rule. Section 225.181(a) of the proposed rule implements these provisions. Additionally, the statute and the proposed rule permit the Board, by rule or order, to extend the generally available two-year conformance period by up to three additional one-year periods (for a total of 5 years), if the Board finds that the extension is consistent with the purposes of the Volker Rule and would not be detrimental to the public interest. The proposed rule requires that any banking entity or nonbank financial company supervised by the Board that seeks a one-year extension of the conformance period under this authority submit a request to the Board that contains a variety of information regarding the nature of the activity and the reasons why the company seeks an extension. The proposed rule sets forth proposed definitions for a number of items, including: "illiquid fund", "illiquid assets", "liquid assets", "principally invested", "contractually committed to principally invest", and "contractual obligation". The proposed rule requests public comment on all its provisions. | |
| Agency: Federal Reserve System(FRS) | Priority: Substantive, Nonsignificant |
| RIN Status: First time published in the Unified Agenda | Agenda Stage of Rulemaking: Completed Actions |
| Major: No | Unfunded Mandates: No |
| CFR Citation: 12 CFR 225 | |
| Legal Authority: 12 USC 1817 12 USC 1851 | |
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Legal Deadline:
None |
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Timetable:
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| Regulatory Flexibility Analysis Required: No | Government Levels Affected: None |
| Small Entities Affected: No | Federalism: No |
| Included in the Regulatory Plan: No | |
| RIN Data Printed in the FR: No | |
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Agency Contact: Jeremy R. Newell Senior Attorney Federal Reserve System Legal Division, Phone:202 452-3239 |
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