Agencies to Coordinate Foreign Funds Review Under Volcker Rule

By Jeff Bater

Five financial regulators announced they will conduct a joint review of how certain foreign funds are treated under the Volcker Rule.

The Federal Reserve, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission said “they are coordinating their respective reviews” to ensure that foreign funds that should be exempt from the Volcker Rule are not subject to it.

The Dodd-Frank rule prohibits banks from conducting certain trading activities with their own accounts and limits their ownership of and relationship with hedge funds and private equity funds.

The agencies said complexities in the statute and the implementing regulations may result in certain foreign funds becoming subject to regulation under Volcker because of governance arrangements with or investments by a foreign bank.

“As a result, a number of foreign banking entities, foreign government officials, and other market participants have expressed concern about possible unintended consequences and extraterritorial impact,” the agencies said.

One-Year Delay

The banking regulators, which oversee foreign banks’ U.S. operations, said in a statement they would not take action under Volcker for qualifying foreign excluded funds for one year.

Aside from the action announced July 21, regulators are expected to launch a broader review of the rule in the future.

Acting Comptroller of the Currency Keith Noreika said in an address July 19 the OCC might seek public comment on the rule — and would be willing to act before other agencies.“ At the end of the day, I think we are going to, whether with others or by ourselves, push forward and seek public input on what can be done,” he said.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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