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Volcker Rule, Generally Hedge Funds and Private Equity Funds Capital Markets Branch, (202) 898–6888; Michael B 46422 Federal Register / Vol. 85, No. 148 / Friday, July 31, 2020 / Rules and Regulations DEPARTMENT OF TREASURY requirements related to the covered and Katherine Hsu, Office Chief, or fund provisions of the rules. Benjamin Meeks, Special Counsel at Office of the Comptroller of the DATES: Effective date: The final rule is (202) 551–3850, Office of Structured Currency effective October 1, 2020. Finance, Division of Corporation FOR FURTHER INFORMATION CONTACT: Finance, U.S. Securities and Exchange 12 CFR Part 44 OCC: Roman Goldstein, Risk Commission, 100 F Street NE, Washington, DC 20549. [Docket No. OCC–2020–0002] Specialist, Treasury and Market Risk Policy, (202) 649–6360; Tabitha Edgens, SUPPLEMENTARY INFORMATION: RIN 1557–AE67 Counsel; Mark O’Horo, Senior Attorney, Table of Contents Chief Counsel’s Office, (202) 649–5490; FEDERAL RESERVE SYSTEM for persons who are deaf or hearing I. Background impaired, TTY, (202) 649–5597, Office II. Notice of Proposed Rulemaking 12 CFR Part 248 III. Overview of the Final Rule of the Comptroller of the Currency, 400 IV. Summary of the Final Rule [Docket No. R–1694] 7th Street SW, Washington, DC 20219. A. Qualifying Foreign Excluded Funds Board: Flora Ahn, Special Counsel, B. Modifications to Existing Covered Fund RIN 7100–AF70 (202) 452–2317, Gregory Frischmann, Exclusions Senior Counsel, (202) 452–2803, Kirin 1. Foreign Public Funds FEDERAL DEPOSIT INSURANCE Walsh, Attorney, (202) 452–3058, or 2. Loan Securitizations CORPORATION Sarah Podrygula, Attorney, (202) 912– 3. Public Welfare and Small Business 4658, Legal Division, Elizabeth Funds 12 CFR Part 351 MacDonald, Manager, (202) 475–6316, C. Additional Covered Fund Exclusions Cecily Boggs, Senior Financial 1. Credit Funds RIN 3064–AF17 2. Venture Capital Funds Institution Policy Analyst, (202) 530– 3. Family Wealth Management Vehicles COMMODITY FUTURES TRADING 6209, Brendan Rowan, Senior Financial 4. Customer Facilitation Vehicles COMMISSION Institution Policy Analyst, (202) 475– D. Limitations on Relationships With a 6685, Christopher Powell, Senior Covered Fund 17 CFR Part 75 Financial Institution Policy Analyst, E. Ownership Interest (202) 452–3442, Nathaniel Grant, Lead F. Parallel Investments RIN 3038–AE93 Financial Institution Policy Analyst, G. Technical Amendments V. Administrative Law Matters SECURITIES AND EXCHANGE (202) 452–3105, David McArthur, Senior Economist, (202) 452–2985, A. Use of Plain Language COMMISSION B. Paperwork Reduction Act Division of Supervision and Regulation; C. Regulatory Flexibility Act Analysis 17 CFR Part 255 Board of Governors of the Federal D. Riegle Community Development and Reserve System, 20th and C Streets NW, Regulatory Improvement Act [Release No. BHCA–9; File No. S7–02–20] Washington, DC 20551. E. OCC Unfunded Mandates Reform Act FDIC: Bobby R. Bean, Associate F. SEC Economic Analysis RIN 3235–AM70 Director, [email protected], Andrew D. G. Congressional Review Act Prohibitions and Restrictions on Carayiannis, Senior Policy Analyst, I. Background [email protected], or Brian Cox, Proprietary Trading and Certain 1 Senior Policy Analyst, [email protected], Section 13 of the BHC Act, also Interests in, and Relationships With, known as the Volcker Rule, generally Hedge Funds and Private Equity Funds Capital Markets Branch, (202) 898–6888; Michael B. Phillips, Counsel, prohibits any banking entity from AGENCY: Office of the Comptroller of the [email protected], Benjamin J. Klein, engaging in proprietary trading or from Currency, Treasury (OCC); Board of Counsel, [email protected], or Annmarie acquiring or retaining an ownership Governors of the Federal Reserve H. Boyd, Counsel, [email protected], interest in, sponsoring, or having certain System (Board); Federal Deposit Legal Division, Federal Deposit relationships with a hedge fund or 2 Insurance Corporation (FDIC); Securities Insurance Corporation, 550 17th Street private equity fund (covered fund). The and Exchange Commission (SEC); and NW, Washington, DC 20429. statute expressly exempts from these Commodity Futures Trading CFTC: Cantrell Dumas, Special prohibitions various activities, Commission (CFTC). Counsel, (202) 418–5043, cdumas@ including, among other things: • Underwriting and market making- ACTION: Final rule. cftc.gov, Division of Swap Dealer and Intermediary Oversight; Mark Fajfar, related activities; • Risk-mitigating hedging activities; SUMMARY: The OCC, Board, FDIC, SEC, Assistant General Counsel, (202) 418– • Activities on behalf of customers; and CFTC (together, the agencies) are 6636, [email protected], Office of the • Activities for the general account of adopting amendments to the regulations General Counsel; Stephen Kane, insurance companies; and implementing section 13 of the Bank Research Economist, (202) 418–5911, • Trading and covered fund activities Holding Company Act (BHC Act). [email protected], Office of the Chief and investments by non-U.S. banking Section 13 contains certain restrictions Economist; Commodity Futures Trading entities solely outside the United on the ability of a banking entity or Commission, Three Lafayette Centre, States.3 nonbank financial company supervised 1155 21st Street NW, Washington, DC In addition, section 13 of the BHC Act by the Board to engage in proprietary 20581. contains an exemption that permits trading and have certain interests in, or SEC: Juliet M. Han, Senior Counsel, banking entities to organize and offer, relationships with, a hedge fund or William Miller, Senior Counsel, including sponsor, covered funds, private equity fund (covered funds). Benjamin A. Tecmire, Senior Counsel, subject to certain restrictions, including These final amendments are intended to or Jennifer Songer, Branch Chief at (202) improve and streamline the regulations 551–6787 or [email protected], 1 12 U.S.C. 1851. implementing section 13 of the BHC Act Investment Adviser Regulation Office, 2 Id. by modifying and clarifying Division of Investment Management, 3 12 U.S.C. 1851(d)(1). VerDate Sep<11>2014 20:59 Jul 30, 2020 Jkt 250001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\31JYR4.SGM 31JYR4 Federal Register / Vol. 85, No. 148 / Friday, July 31, 2020 / Rules and Regulations 46423 that banking entities do not rescue covered fund provisions beyond those proposal would have codified an investors in those funds from loss, and changes for which specific rule text was existing policy statement by the Federal are not themselves exposed to proposed.9 The 2019 amendments banking agencies (the OCC, Board, and significant losses due to investments in finalized those changes to the covered FDIC) that addresses the potential issues or other relationships with these funds.4 fund provisions for which specific rule related to a foreign banking entity Authority under section 13 of the text was proposed in the 2018 controlling qualifying foreign excluded BHC Act for developing and adopting proposal.10 The agencies indicated they funds. regulations to implement the would issue a separate proposal The 2020 proposal also would have prohibitions, restrictions, and addressing and requesting comment on made modifications to several existing exemptions of section 13 is shared the covered fund provisions of the rule exclusions from the covered fund among the Board, the FDIC, the OCC, and other fund-related issues, and, in provisions to provide clarity and the SEC, and the CFTC (individually, an February 2020, the agencies issued a simplify compliance with the agency, and collectively, the agencies).5 separate notice of proposed rulemaking requirements of the implementing The agencies originally issued a final that specifically addressed those areas regulations. First, the 2020 proposal rule implementing section 13 in (the 2020 proposal).11 would have revised certain restrictions in the foreign public funds exclusion to December 2013 (the 2013 rule), and II. Notice of Proposed Rulemaking those provisions became effective on more closely align the provision with April 1, 2014.6 In the 2020 proposal, the agencies the exclusion for similarly-situated U.S. The agencies published a notice of proposed revisions to a number of the registered investment companies. proposed rulemaking in July 2018 (the provisions regarding covered fund Second, the 2020 proposal would have 2018 proposal) that proposed several investments and activities as well as to permitted loan securitizations excluded amendments to the 2013 rule.7 These other provisions of the implementing from the definition of covered fund to proposed revisions sought to provide regulations related to the treatment of hold a small amount of non-loan assets, greater clarity and certainty about what funds. The proposed changes, which consistent with past industry practice, activities are prohibited under the 2013 were based on comments received in and would have codified existing staff- rule—in particular, under the response to the agencies’ questions in level guidance regarding this exclusion. prohibition on proprietary trading—and the 2018 proposal and the agencies’ In addition, the 2020 proposal would to better tailor the compliance experience with the implementing have revised the exclusion for small requirements based on the risk of a regulations, were intended to reduce the business investment companies to banking entity’s trading activities. The extraterritorial impact of the account for the life cycle of those agencies issued a final rule implementing regulations, improve and companies and requested comment on implementing amendments to the 2013 streamline the covered fund provisions,
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