K&L Gates recently published a legal alert regarding recently proposed regulations to implement the Volcker Rule (the "Proposal"). The alert summarizes key elements of the Proposal, focusing on how it would significantly limit or affect the relationships that depository institutions and their affiliates have with hedge funds, private equity funds, and other similar funds ("covered funds").
The Volcker Rule generally prohibits a banking entity from: (i) sponsoring, or acquiring or retaining an ownership interest in, a covered fund; or (ii) engaging in certain transactions with a covered fund. The Proposal outlines various exceptions to this general rule, prohibits certain conflicts of interest, and requires banking entities to implement a detailed compliance program. One feature of the Proposal would require registered investment advisers to comply with certain federal banking regulations.
The Proposal was issued jointly on October 11, 2011 by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Securities and Exchange Commission. The Commodity Futures Trading Commission is expected to release a similar proposal. Comments on the Proposal are due January 13, 2012. Final regulations will presumably be published prior to July 21, 2012, when the Volcker Rule will be effective.