Federal Register: Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds

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Gavel.png FINAL RULE: This page refers to the CFTC's proposed Volcker Rule. For a summary of the joint final rule, click here.
Dodd-Frank Timeline, The Volcker Rule
Proposal Date Comment Deadline Final Rule Released
October 12, 2011 February 13, 2012 December 10, 2013

On October 12, 2011, the SEC held an open meeting concerning prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds under the Dodd-Frank Act. Among the topics at this meeting were the creation and monitoring of internal compliance programs within banking entities, and the reporting of quantitative measurements by certain trading firms.<ref>SEC Jointly Proposes Prohibitions and Restrictions on Proprietary Trading. SEC. Retrieved on October 12, 2011.</ref> The commission approved a set of proposed rules which were drafted jointly with the FDIC, Federal Reserve and Treasury Department.

Proposed Rules

  • Banking entities must create internal compliance programs "subject to supervisory oversight" in order to comply with Section 619.
  • Certain trading firms must report quantitative measurements to federal agencies.

"At the same time, the proposal would exempt transactions in certain instruments from the prohibition on proprietary trading, including obligations of:

  • The U.S. government or a U.S. government agency
  • The government-sponsored enterprises
  • State and local governments

Additionally, the proposal would exempt activities such as:

  • Market making
  • Underwriting
  • Risk-mitigating hedging

Notwithstanding the general prohibition on investments in and certain relationships with hedge funds and private equity funds, the statute contains several exemptions. The proposal, for example, would exempt:

  • Organizing and offering a hedge fund or private equity funds under certain conditions, including limiting investments in such funds to a de minimus amount.
  • Making risk-mitigating hedging investments.
  • Making investments in certain non-U.S. funds."



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