Cadwalader attorneys analyzed final regulations (the "Amended Final Regulations") adopted by the Office of the Comptroller Currency ("OCC") and FDIC designed to simplify certain aspects of the Volcker Rule. The Federal Reserve Board, the SEC and the CFTC have not yet approved the rule but Cadwalader attorneys stated that they are expected to do so shortly.
As described more fully in the Cadwalader memorandum, the most significant aspects of the Amended Final Regulations include:
tailored application of compliance requirements based on a banking entity's trading assets and liabilities;
elimination of "enhanced" compliance program requirements;
proprietary trading restrictions;
covered fund restrictions; and
relief for foreign banks.
The Amended Final Regulations are effective January 1, 2020, but compliance is not mandatory until January 1, 2021.
The Amended Final Regulations are largely consistent with the specific changes set forth in the 2018 Proposal, but with certain notable changes with respect to the thresholds for the compliance requirements, the definition of a "trading account," and the addition of several new exclusions from the definition of "proprietary trading." The Amended Final Regulations also made certain minor modifications to the 2018 Proposal, including with respect to the proprietary trading prohibition's exemption for liquidity management, the CEO attestation, and certain of the trading metrics.
The emphasis of the Amended Final Regulations is on the compliance program requirements and proprietary trading provisions of the Volcker Rule, with only limited changes relevant to the covered fund provisions of the Volcker Rule. However, the Agencies indicated that they are intending to issue separate rulemaking proposals regarding certain other aspects of the Volcker Rule, in particular, relating to the Volcker Rule's fund-related provisions, the treatment of funds organized outside the U.S. (notably, whether such funds should be treated as "banking entities" subject to the Volcker Rule), and the Volcker Rule's "Super 23A" restrictions on transactions with advised- or sponsored-covered funds.
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