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Regulators Issue Volcker Rule Proposal

Posted on 10/12/2011

The federal banking and securities regulators yesterday issued a 298-page proposal to implement the Dodd-Frank Act's Volcker Rule provisions, which would prohibit financial entities from engaging in proprietary trading activities, and from investing in and sponsoring hedge funds and private equity funds.

The proposal broadly defines "proprietary trading" and the types of sponsorship and investments in hedge fund and private-equity funds that would be prohibited. Certain investments would receive exemptions, including those done on behalf of customers through advisory and asset-management services, and "de minimis" investments not exceeding 3 percent of a bank's Tier 1 capital.
The burden would not just affect larger banks. The proposal states (page 203) that it would impact a total of 11,608 banking entities, including 1,139 supervised by the FDIC, 469 under the OCC, and 10,000 supervised by the Federal Reserve.

The comment deadline on the proposal is January 13, 2012.

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