What are covered funds under the Volcker Rule?
Loosely put, the Rule defines a covered fund as anything not considered an investment company in the Investment Company Act, including private equity and hedge funds, as well as commodity pools with certain exclusions, and funds sponsored by a US banking entity where the affiliate holds ownership interests.
What are the covered funds exclusions Volcker?
New Covered Fund Exclusions. The Covered Fund Amendments create four new exclusions from the definition of covered fund for: (i) credit funds, (ii) venture capital funds, (iii) family wealth management vehicles; and (iv) customer facilitation vehicles.
What does it mean to sponsor a covered fund for Volcker Rule purposes?
The Volcker Rule generally prohibits a banking entity from entering into transactions with a related fund that w ould be a covered transaction under section 23A of the Federal Reserve Act if the banking entity w ere a member bank and the fund w ere its affiliate.
What is Totus Volcker Rule?
TOTUS Exemption The Volcker Rule permits certain foreign banking entities to engage in proprietary trading activities that occur solely outside of the US. The 2013 Final Rule included several conditions to use the TOTUS exemption.
Can employees invest in covered funds?
The Proposed Rules would allow banking entity employees to invest in their personal capacities in covered funds to which those employees provide advisory and other services; however, such investments may be attributed to the banking entity if it extends credit to the employees for, or otherwise guarantees, the …
Can bank employees invest in covered funds?
(ii) A banking entity shall not be restricted under this section in the amount of any investment the banking entity makes alongside a covered fund as long as the investment is made in compliance with applicable laws and regulations, including applicable safety and soundness standards.
What is super 23A?
Revisions to Super 23A The so-called Super 23A provisions of the Volcker Rule generally prohibit “covered transactions” between a covered fund and a banking entity (and the affiliates of such banking entity) that sponsors or advises or organizes and offers such fund.
What is risk mitigating hedging?
Risk-mitigating hedging: This exemption would apply to hedging activity that is designed to reduce, and demonstrably reduces or significantly mitigates, specific, identifiable risks of individual or aggregated positions of the banking entity.
Is the Volcker Rule still in effect?
The Final Amendments, along with the Final Rule, that will be effective October 1, 2020, will ease prior restrictions on banking entities by adding four new types of funds to the Volcker Rule’s list of exclusions.
What is Volcker 23A?
The so-called Super 23A provisions of the Volcker Rule generally prohibit “covered transactions” between a covered fund and a banking entity (and the affiliates of such banking entity) that sponsors or advises or organizes and offers such fund.
What is Totus exemption?
To rely on the TOTUS exemption, the 2013 Rule requires, among other conditions, that trades not be conducted with or through a U.S. entity (subject to certain exceptions). This has required foreign banking entities to verify whether counterparties are U.S. entities or qualify for exceptions.
What is the Volcker Rule for hedge funds?
Reviewed by James Chen. Updated Jun 25, 2019. The Volcker Rule is a federal regulation that generally prohibits banks from conducting certain investment activities with their own accounts and limits their dealings with hedge funds and private equity funds, also called covered funds.
Does the Volcker Rule benefit banks?
The Volcker Rule relies on the premise that these speculative trading activities do not benefit banks’ customers.
What is the history of the Volcker Rule?
History of the Volcker Rule. Named after former Federal Reserve Chairman Paul Volcker, the Volcker Rule refers to section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which sets forth rules for implementing section 13 of the Bank Holding Company Act of 1956.
What is the new Volcker Rule 2020?
On June 25, 2020, five federal financial regulators jointly issued a final rule that modifies existing regulations implementing the Volcker Rule’s general prohibition on banking entities investing in, sponsoring, or having certain relationships with hedge funds or private equity funds (collectively, “covered funds”).