One of the most controversial provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act1 is the so-called “Volcker Rule,” named after Paul Volcker, a former chair of the Board of Governors of the Federal Reserve System (FRB). The Volcker Rule refers to Section 619 of Dodd-Frank. It contains prohibitions and restrictions on the ability of banking organizations and systemically significant nonbank financial companies to engage in proprietary trading or investing in or sponsoring a hedge or private equity fund. On Nov. 7, 2011, the U.S. federal banking agencies and the Securities and Exchange Commission issued a proposed rule for comment that would implement the Volcker Rule.2 Almost 19,000 comments were received by the time the comment period closed in February 2012, although over 18,000 of them were form letters.
One of the exemptions from the Volcker restrictions is for transactions taking place “solely outside the United States.” This month’s column will discuss and highlight some of the comments made by non-U.S. banks with respect to this exemption in the context of the ban on proprietary trading.
