Document ID: SEC-2014-0189-0001
Agency: sec
Document Type: Rule
Title: Dodd-Frank Act: Debt Obligations Backed Primarily by Trust Preferred Securities
Posted Date: 2014-01-31T05:00Z

[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Rules and Regulations]
[Pages 5223-5228]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02019]

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 Rules and Regulations
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  Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Rules 
and Regulations  

[[Page 5223]]

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 44

[Docket No. OCC-2014-0003]
RIN 1557-AD79

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

12 CFR Part 248

[Docket No. R-1480]
RIN 7100 AE-11

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 351

RIN 3064-AE11

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 255

[Release No. BHCA-2]
RIN 3235-AL52

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 75

RIN 3038-AE13

Treatment of Certain Collateralized Debt Obligations Backed 
Primarily by Trust Preferred Securities With Regard to Prohibitions and 
Restrictions on Certain Interests in, and Relationships With, Hedge 
Funds and Private Equity Funds

AGENCY: Office of the Comptroller of the Currency, Treasury (``OCC''); 
Board of Governors of the Federal Reserve System (``Board''); Federal 
Deposit Insurance Corporation (``FDIC''); Commodity Futures Trading 
Commission (``CFTC'') and Securities and Exchange Commission (``SEC'').

ACTION: Interim final rule.

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SUMMARY: The OCC, Board, FDIC, CFTC and SEC (individually, an 
``Agency,'' and collectively, ``the Agencies'') are each adopting a 
common interim final rule that would permit banking entities to retain 
investments in certain pooled investment vehicles that invested their 
offering proceeds primarily in certain securities issued by community 
banking organizations of the type grandfathered under section 171 of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-
Frank Act''). The interim final rule is a companion rule to the final 
rules adopted by the Agencies to implement section 13 of the Bank 
Holding Company Act of 1956 (``BHC Act''), which was added by section 
619 of the Dodd-Frank Act.

DATES: Effective date: The interim final rule is effective on April 1, 
2014. Comment date: Comments on the interim final rule should be 
received on or before March 3, 2014.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to all of the Agencies. Commenters are encouraged to use the 
title ``Treatment of Certain Collateralized Debt Obligations Backed 
Primarily by Trust Preferred Securities with Regard to Prohibitions and 
Restrictions on Certain Interests in, and Relationships with, Hedge 
Funds and Private Equity Funds'' to facilitate the organization and 
distribution of comments among the Agencies.
    Office of the Comptroller of the Currency: Because paper mail in 
the Washington, DC area and at the OCC is subject to delay, commenters 
are encouraged to submit comments by the Federal eRulemaking Portal or 
email, if possible. Please use the title ``Treatment of Certain 
Collateralized Debt Obligations Backed Primarily by Trust Preferred 
Securities with Regard to Prohibitions and Restrictions on Certain 
Interests in, and Relationships with, Hedge Funds and Private Equity 
Funds'' to facilitate the organization and distribution of the 
comments. You may submit comments by any of the following methods:
     Federal eRulemaking Portal--``Regulations.gov'': Go to 
http://www.regulations.gov. Enter ``Docket ID OCC-2014-0003'' in the 
Search Box and click ``Search.'' Results can be filtered using the 
filtering tools on the left side of the screen. Click on ``Comment 
Now'' to submit public comments.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting or viewing public comments, viewing other supporting and 
related materials, and viewing the docket after the close of the 
comment period.
     Email: regs.comments@occ.treas.gov.
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, Mail Stop 9W-11, Washington, DC 20219.
     Fax: (571) 465-4326.
     Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, 
Mail Stop 9W-11, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID ``OCC-2014-0003'' in your comment. In general, OCC will 
enter all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this proposed rulemaking by any of the following methods:
     Viewing Comments Electronically: Go to http://www.regulations.gov. Select ``Document Type'' of ``Public 
Submissions,'' and in the ``Enter Keyword or ID Box,'' enter Docket ID 
``OCC-2014-0003,'' and click ``Search.'' Comments can be filtered by 
Agency using the filtering tools on the left side of the screen.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
viewing public comments, viewing other supporting and related 
materials, and

[[Page 5224]]

viewing the docket after the close of the comment period.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC 
20219. For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 649-
6700. Upon arrival, visitors will be required to present valid 
government-issued photo identification and submit to security screening 
in order to inspect and photocopy comments.
    Docket: You may also view or request available background documents 
and project summaries using the methods described above.
    Board of Governors of the Federal Reserve System:
    You may submit comments, identified by Docket No. R-1480 and RIN 
7100 AE-11, by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Address to Robert deV. Frierson, Secretary, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue NW., Washington, DC 20551.
    All public comments will be made available on the Board's Web site 
at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets NW.) between 
9:00 a.m. and 5:00 p.m. on weekdays.
    Federal Deposit Insurance Corporation: You may submit comments, 
identified by RIN number, by any of the following methods:
     Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on 
the Agency Web site.
     Email: Comments@fdic.gov. Include the RIN number 3064-AE11 
on the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW., 
Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7:00 a.m. and 5:00 p.m.
    Public Inspection: All comments received must include the agency 
name and RIN 3064-AE11 for this rulemaking. All comments received will 
be posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html, including any personal information provided. 
Paper copies of public comments may be ordered from the FDIC Public 
Information Center, 3501 North Fairfax Drive, Room E-I002, Arlington, 
VA 22226 by telephone at 1 (877) 275-3342 or 1 (703) 562-2200.
    Commodity Futures Trading Commission: You may submit comments, 
identified by RIN number 3038-AE13 by any of the following methods:
     Agency Web site: http://comments.cftc.gov.
     Mail: Secretary of the Commission, Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street NW., 
Washington, DC 20581.
     Hand Delivery: Same as mail above.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow instructions for submitting comments.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
www.cftc.gov. You should submit only information that you wish to make 
available publicly. If you wish the CFTC to consider information that 
is exempt from disclosure under the Freedom of Information Act, a 
petition for confidential treatment of the exempt information may be 
submitted according to the procedure established in Sec.  145.9 of the 
CFTC's regulations (17 CFR 145.9).
    The CFTC reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse, or remove any or all of 
your submission from http://www.cftc.gov that it may deem to be 
inappropriate for publication, such as obscene language. All 
submissions that have been redacted or removed that contain comments on 
the merits of the rulemaking will be retained in the public comment 
file and will be considered as required under the Administrative 
Procedure Act and other applicable laws, and may be accessible under 
the Freedom of Information Act.
    Securities and Exchange Commission: You may submit comments by the 
following method:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/interim-final-temp.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number S7-01-14 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number S7-01-14. This file number 
should be included on the subject line if email is used. To help us 
process and review your comments more efficiently, please use only one 
method. The SEC will post all comments on the SEC's Internet Web site 
(http://www.sec.gov/rules/interim-final-temp.shtml). Comments are also 
available for Web site viewing and printing in the SEC's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. All 
comments received will be posted without change; we do not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT:
    OCC: Tiffany Eng, Legislative and Regulatory Activities Division, 
(202) 649-5490, Office of the Comptroller of the Currency, 400 7th 
Street SW., Washington, DC 20219.
    Board: Christopher M. Paridon, Counsel, (202) 452-3274, or Anna M. 
Harrington, Senior Attorney, (202) 452-6406, Legal Division, Board of 
Governors of the Federal Reserve System, 20th and C Streets NW., 
Washington, DC 20551.
    FDIC: Bobby R. Bean, Associate Director, bbean@fdic.gov. or Karl R. 
Reitz, Chief, Capital Markets Strategies Section, kreitz@fdic.gov, 
Capital Markets Branch, Division of Risk Management Supervision, (202) 
898-6888; Michael B. Phillips, Counsel, mphillips@fdic.gov, or Gregory 
S. Feder, Counsel, gfeder@fdic.gov, Legal Division, Federal Deposit 
Insurance Corporation, 550 17th Street NW., Washington, DC 20429.
    CFTC: Erik Remmler, Deputy Director, Division of Swap Dealer and

[[Page 5225]]

Intermediary Oversight (``DSIO''), (202) 418-7630, eremmler@cftc.gov; 
Paul Schlichting, Assistant General Counsel, Office of the General 
Counsel (``OGC''), (202) 418-5884, pschlichting@cftc.gov; Mark Fajfar, 
Assistant General Counsel, OGC, (202) 418-6636, mfajfar@cftc.gov; 
Michael Barrett, Attorney-Advisor, DSIO, (202) 418-5598, 
mbarrett@cftc.gov, Commodity Futures Trading Commission, 1155 21st 
Street NW., Washington, DC 20581.
    SEC: W. Danforth Townley, Attorney Fellow, Jane H. Kim or Brian 
McLaughlin Johnson, Senior Counsels, Division of Investment Management, 
(202) 551-6787, U.S. Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 619 of the Dodd-Frank Act added a new section 13 to the BHC 
Act (codified at 12 U.S.C. 1851) that generally prohibits banking 
entities from engaging in proprietary trading and from investing in, 
sponsoring, or having certain relationships with a hedge fund or 
private equity fund. These prohibitions are subject to a number of 
statutory exemptions, restrictions and definitions.
    Section 13 of the BHC Act expressly authorizes the Board, OCC, 
FDIC, CFTC, and SEC to issue implementing regulations. Each Agency 
issued a common final rule implementing section 619 that becomes 
effective on April 1, 2014 (``Final Rule'').\1\
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    \1\ The Final Rule will be codified at 12 CFR part 44 (OCC), 12 
CFR part 248 (FRB), 12 CFR part 351 (FDIC), 17 CFR part 75 (CFTC), 
and 17 CFR part 255 (SEC). The Final Rule defines a covered fund as 
an issuer that would be an investment company as defined in the 
Investment Company Act of 1940 (the ``Investment Company Act'') but 
for section 3(c)(1) or 3(c)(7) of that Act, and also includes and 
excludes certain entities. This definition implements the definition 
of ``hedge fund'' and ``private equity fund'' in section 13(h)(2) of 
the BHC Act. See 12 U.S.C. 1851(h)(2).
---------------------------------------------------------------------------

    A separate provision of the Dodd-Frank Act, section 171, generally 
provides that trust preferred and certain other securities issued by 
depository institution holding companies must be phased-out of such 
companies' calculation of regulatory capital for purposes of 
determining Tier 1 capital. However, section 171 further provides for 
the permanent grandfathering of debt and equity securities issued 
before May 19, 2010, by any depository institution holding company that 
had total consolidated assets of less than $15 billion as of December 
31, 2009, or was a mutual holding company on May 19, 2010 (``community 
banking organizations''). These grandfathered capital-raising 
instruments in the form of trust preferred securities or subordinated 
debt securities (collectively referred to herein as ``TruPS'') were 
issued by community banks frequently through securitization pools 
(``TruPS CDOs'') that were formed for the purpose of acquiring these 
TruPS.

II. Discussion

    Section 619 generally prohibits a banking entity from acquiring or 
retaining any ownership in, or acting as sponsor to, a hedge fund or 
private equity fund, which are defined under the statute to mean an 
issuer that would be an investment company, as defined in the 
Investment Company Act, but for section 3(c)(1) or 3(c)(7) of that Act, 
or ``such similar funds'' as the Agencies determine by rule. The 
Agencies have by separate rule implementing section 619, in relevant 
part, defined a hedge fund or private equity fund through the term 
``covered fund'' to be any issuer that would be an investment company 
under the Investment Company Act but for section 3(c)(1) or 3(c)(7) of 
that Act, with certain exceptions and additions.\2\ This definition 
generally includes pooled investment vehicles, such as many TruPS CDOs, 
that use 3(c)(1) or 3(c)(7) but do not qualify for another exclusion 
under the Investment Company Act or the Final Rule.
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    \2\ See Final Rule Sec.  ----.10(b)(1)(i).
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    Section 171 of the Dodd-Frank Act requires, among other things, 
that the appropriate Federal banking agencies establish minimum 
leverage and risk-based capital requirements for insured depository 
institutions and depository institution holding companies that are not 
less than the generally applicable capital requirements that were in 
effect for insured depository institutions as of the date of enactment 
of the Dodd-Frank Act.\3\ The focus of this section on ensuring that 
depository institutions and their holding companies maintain strong 
minimum capital levels is one of the key prudential provisions included 
in the Dodd-Frank Act. Importantly in the current context and as noted 
above, section 171 specifically permits any community banking 
organization to continue to rely for regulatory capital purposes on any 
debt or equity instruments issued before May 19, 2010.\4\
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    \3\ See 12 U.S.C. 5371.
    \4\ See 12 U.S.C. 5371(b)(4)(C).
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    A number of community banking organizations have recently expressed 
concern that the Final Rule conflicts with the Congressional 
determination under section 171(b)(4)(C) of the Dodd-Frank Act to 
grandfather TruPS issued as of May 19, 2010, by community banking 
organizations.\5\ Many community banks and other market participants 
maintain that the issuance of TruPS using a pooled investment structure 
was the only practical way for community banking organizations to avail 
themselves of TruPS for regulatory capital purposes. Accordingly, the 
TruPS CDO structure was the tool that gave effect to the use of TruPS 
as a regulatory capital instrument prior to May 19, 2010 and was part 
of the status quo Congress preserved with the grandfathering provision 
of section 171. In order to avoid imposing restrictions that could 
adversely affect the TruPS CDO market in a manner that could undercut 
the grandfathering provisions that Congress provided in section 171, 
the Agencies believe that certain TruPS CDOs should be a permitted 
investment for all banking entities under section 619 of the Dodd-Frank 
Act.
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    \5\ The banking agencies recently provided guidance on the 
application of the Final Rule to TruPS CDOs. See FAQ Regarding 
Collateralized Debt Obligations Backed by Trust Preferred Securities 
under the Final Volcker Rule, available at http://www.fdic.gov/news/news/press/2013/pr13123a.pdf. See also Statement regarding Treatment 
of Certain Collateralized Debt Obligations Backed by Trust Preferred 
Securities under the Rules implementing Section 619 of the Dodd-
Frank Act, available at http://www.fdic.gov/news/news/financial/2013/fil13062.html (the ``Statement'').
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    The Agencies have determined to act together to adopt an interim 
final rule. This new interim final rule permits a banking entity to 
retain an interest in, or to act as sponsor (including as trustee) of, 
an issuer that is backed by TruPS so long as (i) the issuer was 
established before May 19, 2010; (ii) the banking entity reasonably 
believes that the offering proceeds received by the issuer were 
invested primarily in Qualifying TruPS Collateral (as defined below); 
and (iii) the banking entity's interest in the vehicle was acquired on 
or before December 10, 2013 (unless acquired pursuant to a merger or 
acquisition). Under the interim final rule, a ``Qualifying TruPS 
Collateral'' is defined by reference to the standards in section 
171(b)(4)(C) to mean any trust preferred security or subordinated debt 
instrument issued prior to May 19, 2010 by a depository institution 
holding company that, for any reporting period during the 12 months 
immediately preceding the issuance of such instrument, had total 
consolidated assets of less than $15,000,000,000 or issued prior to May 
19, 2010 by a mutual holding company. The Agencies have required that 
an issuer must have invested primarily in Qualifying TruPS

[[Page 5226]]

Collateral to meet the requirements of the interim final rule; this is 
intended to cover those securitization vehicles that have invested a 
majority of their offering proceeds in Qualifying TruPS Collateral. The 
interim final rule also provides clarification that the relief relating 
to these TruPS CDOs also extends to activities of a banking entity 
acting as a sponsor for these securitization vehicles since acting as a 
sponsor might otherwise be subject to the prohibitions or requirements 
of section 619. For the avoidance of doubt, notwithstanding clause 
(iii) above, a banking entity may act as a market maker with respect to 
the interests of an issuer that qualifies for the exemption, in 
accordance with the applicable provisions of Sec. Sec.  --.4 and --.11 
of the Final Rule. The Agencies note that nothing in the interim final 
rule limits or restricts the ability of the appropriate agency to place 
limits on any activity conducted or investment held pursuant to the 
exemption in a manner consistent with their safety and soundness or 
other authority to the extent the agency has such authority.
    The Agencies believe that the approach adopted in the interim final 
rule appropriately reconciles the policies of section 619 of the Dodd-
Frank Act with its companion provision in section 171 of the Dodd-Frank 
Act and have attempted to encompass the class of instruments Congress 
intended to grandfather while limiting the scope of the interim final 
rule in keeping with the objectives of section 619. The Agencies have 
included a ``reasonable belief'' standard since the relevant CDOs were 
structured and made their investments many years ago and all of the 
relevant documentation may not be readily available to banking 
entities.\6\ Based on discussions with major market participants 
involved in structuring and offering TruPS CDOs, the Agencies expect 
that the interim final rule will cover all of the issuers that were 
formed primarily for the purpose of investing in Qualifying TruPS 
Collateral. The Agencies request comment regarding whether a different 
approach is necessary to accomplish this objective.
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    \6\ To minimize the burden of applying the interim final rule, 
the Board, the FDIC and the OCC will make public a non-exclusive 
list of issuers that meet the requirements of the interim final 
rule. A banking entity may rely on the list published by the Board, 
the FDIC and the OCC.
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III. Request for Comment

    The Agencies invite comment from all members of the public 
regarding all aspects of the interim final rule. The request for 
comment is limited to this interim final rule. The Agencies request 
comment on whether the interim final rule is consistent with the 
purposes of sections 619 and 171 of the Dodd-Frank Act.
    The Agencies will carefully consider all comments that relate to 
this interim final rule.

IV. Administrative Law Matters

A. Interim Final Rule

    The Administrative Procedure Act generally requires an agency to 
publish notice of a proposed rulemaking in the Federal Register.\7\ 
This requirement does not apply, however, when the agency ``for good 
cause finds . . . that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.'' \8\
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    \7\ See 5 U.S.C. 553(b).
    \8\ Id.
---------------------------------------------------------------------------

    After the Agencies' adoption of the Final Rule implementing section 
619, a number of community banking organizations reached out to the 
Agencies to express concerns about the Final Rule and, in particular, 
the implications for financial statement purposes relating to the 
banking organizations' holdings resulting from their previous capital-
raising efforts involving TruPS issued by banking organizations for 
regulatory capital purposes. The Agencies requested comment in the 
Notices of Proposed Rulemaking issued by the Agencies \9\ regarding the 
effects of the definition of covered fund and ownership interests on 
issuers of asset-backed securities, including the distinctions between 
debt and equity interests.\10\ The Agencies also included a request for 
comment on trust preferred securities specifically in the context of 
the proposed rule's permitted activity for underwriting activities.\11\ 
Notwithstanding such requests, the Agencies believe that the recently 
expressed concerns regarding the impact of including TruPS CDOs in the 
definition of covered fund or on investments by community banks in 
TruPS CDOs were not included in comments to the Agencies during the 
comment process.
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    \9\ See 76 FR 68,846 (Nov. 7, 2011) (``joint Notice of Proposed 
Rulemaking''); 77 FR 8332 (Feb. 14, 2012) (``CFTC Notice of Proposed 
Rulemaking'').
    \10\ See Questions 227-240 of the joint Notice of Proposed 
Rulemaking.
    \11\ See Question 78 of the joint Notice of Proposed Rulemaking.
---------------------------------------------------------------------------

    The Agencies have considered carefully these recently identified 
concerns, particularly in light of the provisions in section 171 of the 
Dodd-Frank Act and the concerns raised by community banking 
organizations regarding the consistency of treatment regarding TruPS 
issued by community banking organizations, and grandfathered under 
section 171, and the TruPS CDOs that were used as capital access 
vehicles for the TruPS issuances. In light of the significant concerns 
expressed, the Agencies believe there is an urgent need to act in light 
of the uncertainty expressed by some community banking organizations 
about whether the Final Rule will require them to dispose of their 
holdings of TruPS CDOs, which they contend could have an immediate 
effect on their financial statements and their bank regulatory capital. 
The OCC, Board, FDIC and SEC noted in the Statement that their 
accounting staffs believe that, ``consistent with generally accepted 
accounting principles, any actions in January 2014 that occur before 
the issuance of December 31, 2013 financial reports, including the FR 
Y-9C and the Call Report, should be considered when preparing those 
financial reports.'' The Agencies' decision in this interim final rule 
to permit a banking entity to retain certain TruPS CDOs should be 
factored into the accounting analysis. Accordingly, the Agencies 
believe it necessary to take action at this time before banking 
entities are required to file their next financial reports.\12\
---------------------------------------------------------------------------

    \12\ See Statement, supra note 5, stating that the Agencies' 
intend to address this matter no later than January 15, 2014.
---------------------------------------------------------------------------

    Accordingly, for the reasons discussed throughout, the Agencies 
find good cause to act immediately to adopt this rule on an interim 
final basis without prior solicitation of comment. With this interim 
final rule and request for comment, the Agencies are not reopening the 
final rules that have previously been adopted under section 619.

B. Use of Plain Language

    Section 722 of the Gramm-Leach Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471, 12 U.S.C. 4809) requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The Federal banking agencies believe that the interim 
final rule is written plainly and clearly, and request comment on 
whether there are ways the Federal banking agencies can make any final 
rule easier to understand.

C. Paperwork Reduction Act

    The Agencies note that the new interim final rule does not create 
new regulatory obligations for banking entities, and therefore does not 
impose any new ``collections of information'' within the meaning of the 
Paperwork

[[Page 5227]]

Reduction Act of 1995 (``PRA''),\13\ nor does it create any new filing, 
reporting, recordkeeping, or disclosure reporting requirements. 
Accordingly, the Agencies did not submit the interim final rule to the 
Office of Management and Budget for review in accordance with the PRA. 
The Agencies request comment on their conclusion that there are no 
collections of information.
---------------------------------------------------------------------------

    \13\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

D. Regulatory Flexibility Act

    The interim final rule applies to banking entities that may have 
ownership interests in TruPS CDOs. The requirements of the Regulatory 
Flexibility Act are not applicable to this interim final rule.\14\ 
Nonetheless, the Agencies observe that in light of the way the interim 
final rule operates, they believe that, with respect to the entities 
subject to the interim final rule and within each Agency's respective 
jurisdiction, the interim final rule would not have a significant 
economic impact on a substantial number of small entities. The Agencies 
request comment on their conclusion that the new interim final rule 
should not have a significant economic impact on a substantial number 
of small entities.
---------------------------------------------------------------------------

    \14\ The requirements of the Regulatory Flexibility Act are not 
applicable to rules adopted under the Administrative Procedure Act's 
``good cause'' exception, see 5 U.S.C. 601(2) (defining ``rule'' and 
notice requirements under the Administrative Procedure Act).
---------------------------------------------------------------------------

E. OCC Unfunded Mandates Reform Act of 1995 Determination

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 
U.S.C. 1532, requires a Federal agency to prepare a budgetary impact 
statement before promulgating any rule likely to result in a Federal 
mandate that may result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year. The 
UMRA only applies when the Federal agency issues a general notice of 
proposed rulemaking. Since this rule is published as an interim final 
rule, it is not subject to section 202 of the UMRA.

V. Authority: 12 U.S.C. 1851

    This interim final rule is issued under section 13 of the Bank 
Holding Company Act of 1956, as amended (12 U.S. 1851).

Common Text of the Interim Final Rule

    Add new Sec.  ----.16 to read as follows:

Sec ----.16 Ownership of Interests in and Sponsorship of Issuers of 
Certain Collateralized Debt Obligations Backed by Trust-Preferred 
Securities.

    (a) The prohibition contained in Sec.  ----.10(a)(1) does not apply 
to the ownership by a banking entity of an interest in, or sponsorship 
of, any issuer if:
    (1) The issuer was established, and the interest was issued, before 
May 19, 2010;
    (2) The banking entity reasonably believes that the offering 
proceeds received by the issuer were invested primarily in Qualifying 
TruPS Collateral; and
    (3) The banking entity acquired such interest on or before December 
10, 2013 (or acquired such interest in connection with a merger with or 
acquisition of a banking entity that acquired the interest on or before 
December 10, 2013).
    (b) For purposes of this Sec.  ----.16, Qualifying TruPS Collateral 
shall mean any trust preferred security or subordinated debt instrument 
issued prior to May 19, 2010 by a depository institution holding 
company that, as of the end of any reporting period within 12 months 
immediately preceding the issuance of such trust preferred security or 
subordinated debt instrument, had total consolidated assets of less 
than $15,000,000,000 or issued prior to May 19, 2010 by a mutual 
holding company.
    (c) Notwithstanding paragraph (a)(3) of this section, a banking 
entity may act as a market maker with respect to the interests of an 
issuer described in paragraph (a) of this section in accordance with 
the applicable provisions of Sec. Sec.  ----.4 and ----.11.
    (d) Without limiting the applicability of paragraph (a) of this 
section, the Board, the FDIC and the OCC will make public a non-
exclusive list of issuers that meet the requirements of paragraph (a). 
A banking entity may rely on the list published by the Board, the FDIC 
and the OCC.

End of Common Rule

List of Subjects

12 CFR Part 44

    Administrative Practice and procedure, Banks, Banking, 
Compensation, Credit, Derivatives, Government securities, Insurance, 
Investments, National banks, Federal savings associations, Federal 
branches and agencies, Penalties, Reporting and recordkeeping 
requirements, Risk, Risk retention, Securities, Trusts and trustees.

12 CFR Part 248

    Administrative practice and procedure, Banks and banking, Capital, 
Compensation, Conflict of interests, Credit, Derivatives, Foreign 
banking, Government securities, Holding companies, Insurance, Insurance 
companies, Investments, Penalties, Reporting and recordkeeping 
requirements, Risk, Risk retention, Securities, Trusts and trustees.

12 CFR Part 351

    Banks, Banking, Capital, Compensation, Conflicts of interest, 
Credit, Derivatives, Government securities, Insurance, Insurance 
companies, Investments, Penalties, Reporting and recordkeeping 
requirements, Risk, Risk retention, Securities, State nonmember banks, 
State savings associations, Trusts and trustees.

17 CFR Part 75

    Banks, Banking, Compensation, Credit, Derivatives, Federal branches 
and agencies, Federal savings associations, Government securities, 
Hedge funds, Insurance, Investments, National banks, Penalties, 
Proprietary trading, Reporting and recordkeeping requirements, Risk, 
Risk retention, Securities, Swap dealers, Trusts and trustees, Volcker 
rule.

17 CFR Part 255

    Banks, Brokers, Dealers, Investment advisers, Recordkeeping, 
Reporting, Securities.

Department of the Treasury

Office of the Comptroller of the Currency

Authority and Issuance
    For the reasons stated in the Common Preamble, the Office of the 
Comptroller of the Currency hereby amends chapter I of Title 12, Code 
of Federal Regulations as follows:

PART 44--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND 
RELATIONSHIPS WITH COVERED FUNDS

0
1. The authority for part 44 continues to read as follows:

    Authority:  7 U.S.C. 27 et seq., 12 U.S.C. 1, 24, 92a, 93a, 161, 
1461, 1462a, 1463, 1464, 1467a, 1813(q), 1818, 1851, 3101, 3102, 
3108, 5412.

Sec.  44.16  [Amended]

0
2. Section 44.16 is added as set forth at the end of the Common 
Preamble.

[[Page 5228]]

Board of Governors of the Federal Reserve

Authority and Issuance

    For the reasons set forth in the Common Preamble, the Board of 
Governors of the Federal Reserve System is adding the text of the 
common rule as set forth at the end of the Common Preamble as Sec.  
248.16 to part 248, 12 CFR chapter II.

PART 248--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND 
RELATIONSHIPS WITH COVERED FUNDS (Regulation VV)

0
3. The authority for part 248 continues to read as follows:

    Authority:  12 U.S.C. 1851, 12 U.S.C. 221 et seq., 12 U.S.C. 
1818, 12 U.S.C. 1841 et seq., and 12 U.S.C. 3103 et seq.

Sec.  248.16  [Amended]

0
4. Section 248.16 is added as set forth at the end of the Common 
Preamble.

Federal Deposit Insurance Corporation

Authority and Issuance

    For the reasons set forth in the Common Preamble, the Federal 
Deposit Insurance Corporation is adding the text of the common rule as 
set forth at the end of the Common Preamble as Sec.  351.16 to part 
351, chapter III of Title 12, Code of Federal Regulations.

PART 351--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND 
RELATIONSHIPS WITH COVERED FUNDS

0
5. The authority for part 351 continues to read as follows:

    Authority:  12 U.S.C. 1851; 1811 et seq.; 3101 et seq.; and 
5412.

Sec.  351.16  [Amended]

0
6. Section 351.16 is added as set forth at the end of the Common 
Preamble.

Commodity Futures Trading Commission

 Authority and Issuance

    For the reasons set forth in the Common Preamble, the Commodity 
Futures Trading Commission is adding the text of the common rule as set 
forth at the end of the Common Preamble as Sec.  75.16 to part 75, 
chapter I of Title 17, Code of Federal Regulations.

PART 75--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND 
RELATIONSHIPS WITH COVERED FUNDS

0
7. The authority for part 75 continues to read as follows:

    Authority:  12 U.S.C. 1851.

Sec.  75.16  [Amended]

0
8. Section 75.16 is added as set forth at the end of the Common 
Preamble.

Securities and Exchange Commission

Authority and Issuance

    For the reasons set forth in the Common Preamble, the Securities 
and Exchange Commission is adding the text of the common rule as set 
forth at the end of the Common Preamble as Sec.  255.16 to part 255, 
chapter II of Title 17, Code of Federal Regulations.

PART 255--PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND 
RELATIONSHIPS WITH COVERED FUNDS

0
9. The authority for part 255 continues to read as follows:

    Authority:  12 U.S.C. 1851.

Sec.  255.16  [Amended]

0
10. Section 255.16 is added as set forth at the end of the Common 
Preamble.

    Dated: January 14, 2014.
Thomas J. Curry,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System, January 14, 2014.
Robert deV. Frierson,
Secretary of the Board.
    Dated at Washington, DC this 13th day of January 2014.

    By delegated authority from the Board of Directors of the 
Federal Deposit Insurance Corporation.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
    Dated: January 17, 2014.

    By the Securities and Exchange Commission.
Elizabeth M. Murphy,
Secretary.
    Issued in Washington, DC, on January 15, 2014, by the Commodity 
Futures Trading Commission.
Melissa D. Jurgens,
Secretary of the Commodity Futures Trading Commission.

    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Commodity Futures Trading Commission (CFTC) Appendices to Treatment of 
Certain Collateralized Debt Obligations Backed Primarily by Trust 
Preferred Securities With Regard to Prohibitions and Restrictions on 
Certain Interests in, and Relationships With, Hedge Funds and Private 
Equity Funds--Commission Voting Summary and Statements of Commissioners

Appendix 1--Commodity Futures Trading Commission Voting Summary

    On this matter, Acting Chairman Wetjen and Commissioner Chilton 
voted in the affirmative, and Commissioner O'Malia concurred.

Appendix 2--Statement of CFTC Acting Chairman Mark P. Wetjen

    I support the interim final rule adopted by the CFTC and the other 
Volcker Rule agencies. The Commission believed it was important to join 
the other agencies in ensuring community banks are protected, as 
Congress directed, from restrictions in the Volcker Rule intended to 
lower the risk of large financial institutions.

Appendix 3--Statement of Concurrence by CFTC Commissioner Scott D. 
O'Malia

    I support the interim final rule adopted by the Commission and the 
OCC, Federal Reserve Board, FDIC, and SEC (``Agencies''). When an 
unintended consequence of a regulation is discovered, it is imperative 
that it be expeditiously corrected to avoid unintentional harm to 
affected parties. Broken rules must be fixed, and I applaud the work of 
the Agencies to quickly respond to the public's concerns and comments 
regarding the holding of TruPS CDOs by community banks affected by the 
Volcker Rule.

[FR Doc. 2014-02019 Filed 1-30-14; 8:45 am]
BILLING CODE 6210-01-P; 6741-01-P; 6351-01-P; 8011-01-P; 4810-33-P