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Clifford Chance

Volcker Rule Study Recommends Implementation of a Comprehensive Proprietary Trading Compliance Framework

Client Briefing

21 January 2011

On January 18th, 2011, the Financial Stability Oversight Council (the "Council") published a Study & Recommendations on Prohibitions on Proprietary Trading & Certain Relationships with Hedge Funds & Private Equity Funds (the "Study"). The Study was conducted pursuant to the requirements of Section 619 (commonly referred to as the "Volcker Rule") of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and its principal purpose was to provide implementation recommendations to the regulatory agencies responsible for implementing the provisions of the Volcker Rule.

 
This note outlines the principal aspects of the Council's recommendations on implementing the Volcker Rule's proprietary trading ban. As more fully discussed below, the Study contains helpful suggestions for distinguishing prohibited proprietary trading from market making, hedging, and other permitted activities. At the same time, however, the Study recommends the implementation of a compliance regime of significant complexity. Notably, the Study also suggests that the CEOs of banking entities subject to the Volcker Rule ("covered entities") be required to publicly attest that compliance standards are continually being met.

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Volcker Rule Study Recommends Implementation of a Comprehensive Proprietary Trading Compliance Framework

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