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SEC Staff Issue Volcker Rule Guidance

June 10, 2014
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Late tonight, the SEC’s Divisions of Trading and Markets, Investment Management, and Corporation Finance provided guidance on the Commission’s final rule implementing the “Volcker Rule.” The guidance, in the form of frequently asked questions and answers, addresses:  the requirement to record and report certain quantitative measurements, the conformance period, the definition of covered fund, and organizing and offering a covered fund.

Requirement to record and report certain quantitative measurements. The guidance addresses when banking entities with trading assets and liabilities of at least $50 billion must begin to measure and record the required metrics on a daily basis. Generally, recording of the required metrics will start on July 1, 2014. The daily metrics recorded during July must be reported to the Commission by September 2, 2014. Beginning with information for the month of January 2015, the final rule requires banking entities to report metrics data within 10 days of the end of each calendar month, unless notified otherwise.

The guidance also addresses how trading desks panning multiple affiliated banking entities should be treated for purposes of recording and reporting quantitative measurements.

Conformance period. The Federal Reserve Board has extended the rule’s conformance period to July 21, 2015. As explained by the Board, a banking entity must conform all of its proprietary trading activities and covered fund activities and investments to the prohibitions and requirements of the Volcker Rule by that date. During the conformance period, a banking entity is expected to engage in good-faith efforts, including the evaluation of the extent to which the banking entity is engaged in activities and investments that are covered by the rule, as well as developing and implementing a conformance plan that is appropriately specific about how the banking entity will fully conform all of its covered activities.

Covered fund definition. The guidance addresses the treatment of servicing assets, foreign public funds, and seeding vehicles that will become a foreign public fund.

Organizing and offering a covered fund. The guidance discusses the conditions which must be met if a banking entity acquires and retains an ownership interest in a covered fund that the banking entity organizes and offers. The conditions require, among other things, that the covered fund not share the same name or a variation of the same name with the banking entity (or an affiliate thereof), nor use the word “bank” in its name.

View the guidance here.

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