On June 25, 2020, the Securities and Exchange Commission, Comptroller of the Currency and the Commodity Futures Trading Commission, the Federal Reserve and Federal Deposit Insurance Corporation announced a final rule that will allow banks to invest in private funds including hedge funds, qualified opportunity zone funds (QOFs), and other private equity funds. Indeed, the release specifically referenced QOFs under the section titled “Public Welfare and Small Business Funds” to exclude from Volker Rule’s reach, public welfare and other investments, rural business investment companies and qualified opportunity funds.
This final rule effectively eases the “Volcker Rule” enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Congress in 2010. The Volcker rule prohibited banking entities from engaging in proprietary trading and from acquiring or retaining ownership, sponsoring or even having certain relationships with a hedge fund or private equity fund.
The final rule will take effect on October 1, 2020, which is welcome news for many. It will also permit banks to invest in venture capital transactions, as well as avoid the cash set aside when making derivatives trades between different affiliates of the same firm to free up billions of dollars that banks for investment.
Please see the entire release here: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200625a1.pdf