Dodd-Frank’s Limitations on Risk Taking: An Analysis of the Volcker Rule’s Restrictions on Proprietary Trading and Investments in and Sponsorship of Hedge Funds and Private Equity Funds

July 22, 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, thereby effecting the most sweeping changes to the financial regulatory system since the 1930s. The changes include establishing brand new regulatory bodies, mandating a host of new regulations, as well as attempting to re-impose many of the limitations on bank and bank holding company activities that were in effect prior to the Gramm-Leach-Bliley Act of 1999. This update, which is part of a series of Dechert OnPoints regarding financial regulation reform, analyzes the implications of the Volcker Rule for investment managers, with particular attention devoted to the key terms, the implementation time-line and the likely impact on a banking entity’s existing proprietary trading and hedge and private equity fund operations.

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