US Agencies Issue Final Regulations Implementing The Volcker Rule: A Summary of Key Developments

December 17, 2013

Section 619 of the Dodd-Frank Act, known as the Volcker Rule, is intended to limit risks to the financial system that Congress believes may be created by proprietary trading activities of insured depository institutions, foreign banks with certain U.S. operations, and affiliates of the foregoing entities (“banking entities”) and investments and certain relationships by and between banking entities and private equity funds and hedge funds (“covered funds”). The Volcker Rule seeks to address these risks by imposing prohibitions and restrictions on proprietary trading activities by banking entities (“Trading Restrictions”) and by imposing prohibitions and restrictions on covered fund-related activities by banking entities (“Fund Restrictions”).

The Volcker Rule requires five federal agencies—the Federal Deposit Insurance Corporation (“FDIC”), the Board of Governors of the Federal Reserve System (“FRB”), the Office of the Comptroller of the Currency (“OCC”), the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) (together, the “Agencies”)—to issue regulations to implement the Volcker Rule. The Agencies issued proposed implementing rules in late 2011 and early 2012.

On December 10, 2013, each of the Agencies approved final rules implementing the Volcker Rule (“Regulations,” “final rule,” or “rule”). The Comptroller of the Currency approved the Regulations on behalf of the OCC, and the FRB’s Board of Governors and the FDIC’s Board of Directors unanimously approved the Regulations. The SEC’s Commissioners voted 3-2, and the CFTC’s Commissioners voted 3-1 to approve the Regulations.

The key changes and developments regarding the Regulations that have arisen since the proposed rules were issued are discussed in this OnPoint.