Source: https://www.cadwalader.com/index.php?/resources/clients-friends-memos/fed-issues-final-regulations-on-the-volcker-rules-extension-periods
Timestamp: 2018-04-24 14:38:28
Document Index: 288416261

Matched Legal Cases: ['art 225', '§ 225', '§ 225', '§ 225', '§ 1843', '§ 225', '§ 225', '§ 225', '§ 225', '§ 225', '§ 225', '§ 225', '§ 225', '§ 225', '§ 225', '§ 225']

The Volcker Rule confers on the Federal Reserve Board the authority to grant a discretionary one-time five-year extension to a banking entity that is contractually obligated to maintain an investment in an illiquid fund. Much of the final rulemaking and its Supplementary Information is devoted to this aspect of the Volcker Rule.
The final regulations adopt the 75% standard of principally invested as announced in the proposed rulemaking. Thus, a fund is considered principally invested in illiquid assets if at least 75% of its assets are comprised of illiquid assets. The final regulations require that the determination be made based on the fund’s most recent financial statements (prepared under U.S. GAAP) in the 90 days preceding May 1, 2010. The final regulations also allow a fund to include in its 75% calculation and treat as illiquid assets any assets, even if liquid, to the extent they are held by the fund as risk-mitigating hedges for its illiquid assets.10
(i) Whether the activity or investment--
(iv) The date that the banking entity’s contractual obligation to make or retain an investment in the fund was incurred and when it expires;
(v) The contractual terms governing the banking entity’s interest in the fund;
(vii) The types of assets held by the fund, including whether any assets that were illiquid when first acquired by the fund have become liquid assets, such as, for example, because any statutory, regulatory, or contractual restrictions on the offer, sale, or transfer of such assets have expired;
(x) The cost to the banking entity of divesting or disposing of the activity or investment within the applicable period;
(xi) Whether the divestiture or conformance of the activity or investment would involve or result in a material conflict of interest between the banking entity and unaffiliated clients, customers or counterparties to which it owes a duty;
(xii) The banking entity’s prior efforts to divest or conform the activity or investment(s), including, with respect to an illiquid fund, the extent to which the banking entity has made efforts to terminate or obtain a waiver of its contractual obligation to take or retain an equity, partnership, or other ownership interest in, or provide additional capital to, the illiquid fund; and
(xiii) Any other factor that the Federal Reserve Board believes appropriate.17
1 The Volcker Rule was enacted as Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. Law No. 111-203, 124 Stat. 1376 (2010) (H.R. 4173).
2 12 CFR Part 225, Subpart K.
3 For additional information concerning the Volcker Rule, please refer to Cadwalader’s Clients & Friends Memo, An Analysis of the Dodd-Frank Act’s Volcker Rule (October 15, 2010), http://www.cadwalader.com/assets/client_friend/101510VolckerRuleAnalysis.pdf.
4 See 12 CFR § 225.181(a)(2).
5 12 CFR § 225.182(a).
6 12 CFR § 225.181(c). In many respects, the three one-year conformance periods are substantially similar to the conformance period extensions allowed under the Bank Holding Company Act for new bank holding companies with any ongoing impermissible activities. See, e.g., 12 USC § 1843(a); 12 CFR § 225.138.
7 See 12 CFR § 225.182(b).
8 12 CFR § 225.180(g).
9 12 CFR § 225.180(h). The Supplementary Information accompanying the final regulations notes that the components of the definition of liquid assets was derived from other existing federal banking securities laws.
10 12 CFR § 225.180(i).
12 12 CFR § 225.181(b)(2)(i).
13 12 CFR § 225.181(b)(3)(i).
14 12 CFR § 225.181(b)(3)(iii).
15 12 CFR § 225.181(b)(2).
16 12 CFR §§ 225.181(c), (d)(2), 225.182(c).
17 12 CFR §§ 225.181(d), 225.182(d).