The Effect of the Final Volcker Rule on Funds and Securitizations

Summary: On December 10, 2013, the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Board), the Office of the Comptroller of the Currency (OCC), the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) adopted the final version of the so-called Volcker Rule (final rule), the regulation proposed in 2011 (proposed rule) that implements Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Volcker Rule (both as originally proposed and as adopted) and Section 619 limit the ability of banks subject to US regulation and their affiliates (banking entities) to engage in proprietary trading and to own and engage in transactions with privately held funds, including many securitization vehicles. The limitations on transactions with funds are often described by legislators as intended to affect hedge funds and private equity funds.