By Christopher L. Wallace, CPA, Business Assurance & Advisory Services Partner | Financial Services Industry Team
Modifications and Clarifications to the Volcker Rule Covered Fund Provisions
The Volcker Rule was originally proposed by American economist and former Federal Reserve Chair Paul Volcker to restrict United States banks from making certain kinds of speculative investments that Volcker argued would not benefit bank customers. Volcker believed that such speculative activity played a key role in the financial crisis of 2007-2008. The Volcker Rule was originally expected to be implemented as part of the Dodd Frank Act, but various delays and re-considerations delayed the implementation until July of 2015.
Covered Fund Provision Amendments
On June 25, 2020, the regulators responsible for the Volcker Rule approved a set of amendments that modify and clarify the covered fund provisions of the regulations including:
- Permits certain low risk transactions between a banking entity and covered funds for which the banking entity serves as an investment advisor or sponsor
- Simplifies existing provisions of the rule related to foreign public funds, loan securitizations, small business investment companies, and public welfare investments, and
- Permits banking entities to invest in or sponsor certain types of funds that do not raise the concerns the Volcker rule was intended to address, such as credit funds, venture capital funds, customer facilitation funds and family wealth management vehicles.
The hope is that these reduced restrictions will stimulate investment in various small business vehicles as part of the economic stimulus of the CARES Act and other legislation aimed at increasing economic activity.
Our Financial Services Industry team is closely monitoring new and changing regulations that impact Financial Service firms. Questions on this or other regulations impacting your business? Contact us. We can help.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.