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The Volcker Rule and Foreign Banks, Part II


27 October 2011

The Volcker Rule and Foreign Banks, Part II: The "Foreign Funds Exemption" and the Outer Limits of Extraterritorial Reach  

In releasing proposed rules to implement section 619 of the Dodd-Frank Act, the four federal agencies behind the proposed rules (the SEC, the FDIC, the Federal Reserve and the OCC) have not spared foreign banks with US branches, agencies or subsidiaries and the affiliates of such foreign banks from regulation. Section 619 would, if implemented as proposed, greatly expand the reach of US financial services regulation around the globe and in so doing limit the ability of foreign banks to invest in or sponsor private funds that have any US investment or involvement.

While the proposed rules provide a measure of clarity on the boundaries of permissible activities for foreign banks that wish to comply with the foreign funds exemption within section 619, in some points the proposed rules go beyond the text and purpose of section 619. The attached alert looks at the effects of the ban on sponsoring or investing in certain funds on foreign banks and suggests how the Agencies could amend the proposed Rule to ameliorate these concerns while remaining true to the spirit and text of section 619.

Attached please find the full article.


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