The Volcker Rule generally restricts banking entities from owning or sponsoring hedge funds or private equity funds, but a new proposal could change that.
In December, the five federal financial regulatory agencies responsible for oversight and implementation of the Volcker Rule (Federal Reserve, CFTC, FDIC, OCC and SEC) invited public comment on a proposal that would exclude certain community banks from the Volcker Rule, thereby allowing them to invest in private equity and hedge funds.
The agencies’ joint proposal would exclude community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets from the restrictions of the Volcker Rule.
The proposal would also permit a private equity or hedge fund to share the same name with an investment adviser that is not an insured depository institution, company that controls an insured depository institution, or bank holding company.
A link to the proposal can be found here.