SEC and Other Organizations Propose Changes to Volcker Rule’s “Covered Funds” Restrictions

The SEC and several other government agencies — including the Federal Reserve Board, CFTC, FDIC, and OCC — have jointly issued a proposed rule, Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds.

The proposal would modify the Volcker rule’s restrictions that currently prevent banking entities from investing in or sponsoring hedge funds or private equity funds (i.e., “covered funds”). Specifically, the proposal “would improve and streamline the covered funds portion of the rule, address the treatment of certain foreign funds, and permit banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker rule was intended to address.”

Comments on the proposal are due by April 1, 2020.

For more information, see the press release and proposed rule on the SEC’s Web site.