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February 08, 2019

US Agencies (CFTC, FDIC, FED, OCC, and SEC) are proposing to amend the regulations implementing the Bank Holding Company Act's (BHC Act) prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds. The proposed amendments are consistent with the statutory amendments made pursuant to certain sections of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act). Comments for this consultation must be received on or before March 11, 2019 while comments on the Paperwork Reduction Act burden estimates must be received on or before April 09, 2019.

Section 13 of the Bank Holding Company Act of 1956, also known as the Volcker Rule, generally prohibits any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a hedge fund or private equity fund, subject to certain exemptions. The EGRRCP Act, enacted on May 24, 2018, amended section 13 of the BHC Act by modifying the definition of a “banking entity,” to exclude certain small firms from section 13's restrictions and by permitting a banking entity to share a name with a hedge fund or private equity fund that it organizes and offers under certain circumstances. The authority for developing and adopting regulations to implement the prohibitions and restrictions under Section 13 of the BHC Act is shared among the US Agencies. The US Agencies are now proposing to amend the regulations implementing section 13 of the BHC Act in a manner consistent with the statutory amendments made by EGRRCP Act. The statutory amendments in this proposed rule:

  • Exclude from these restrictions certain firms that have total consolidated assets equal to USD 10 billion or less and total trading assets and liabilities equal to 5% or less of total consolidated assets
  • Amend the restrictions applicable to the naming of a hedge fund or private equity fund to permit an investment adviser that is a banking entity to share a name with the fund under certain circumstances

The proposal would not change the current reporting, recordkeeping, or third-party disclosure requirements associated with section 13 of the BHC Act under the Paperwork Reduction Act. However, the proposal would exempt small entities supervised by the Agencies from the reporting, recordkeeping, and all other requirements associated with section 13 of the BHC Act. 

 

Related Link: Proposed Rule in Federal Register

Comment Due Date: March 11, 2019/April 09, 2019

Keywords: Americas, US, Banking, Securities, Volcker Rule, EGRRCP Act, BHC Act, Proprietary Trading, US Agencies

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