A User’s Guide To The Volcker Rule

SUMMARY

The legislation known as the Volcker Rule was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act and codified in Section 13 of the Bank Holding Company Act ("BHC Act").¹ The Volcker Rule generally prohibits, subject to exceptions, a banking entity from engaging in proprietary trading and from acquiring or retaining an ownership interest in or sponsoring a hedge fund or private equity fund. Certain trading and fund activity is expressly permitted – notably, underwriting activities, market making-related activities, and risk-mitigating hedging activities.

The Volcker Rule legislation covered the area with a broad brush, leaving many significant issues open to regulatory interpretation. In December 2013, five federal financial regulatory agencies (collectively, the "Agencies"),² adopted a final rule (the "Final Rule") construing the Volcker Rule.³ The Final Rule also sets out a compliance and reporting regime for banking entities