July 24, 2017
Federal Reserve Board announces guidelines for banking entities seeking an extension to conform certain "seeding" investments in hedge funds or private equity funds to requirements of Volcker Rule
For release at 3:30 p.m. EDT
The Federal Reserve Board on Monday announced guidelines for banking entities seeking an extension to conform certain "seeding" investments in hedge funds or private equity funds ("covered funds") to the requirements of section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule. Seeding refers to the period during which a banking entity provides a new fund with initial equity to permit the fund to attract investors.
The Dodd-Frank Act permits the Board, upon an application by a banking entity, to provide up to an additional two years to conform seeding investments in covered funds to the requirements of the statute if the Board finds the extension would be consistent with safety and soundness and in the public interest.
According to the guidelines adopted by the Board, firms seeking a seeding period extension should submit information including the reasons for the extension and an explanation of the entity's plan to conform the investment to the requirements of section 619.
Section 619 generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a covered fund. These prohibitions are subject to a number of statutory exemptions, restrictions, and definitions.
Monday's action related only to the extension requests for seeding investments and does not otherwise modify the rules implementing section 619.
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