On January 29, 2015, the US financial regulators issued additional guidance to the industry on the application of the Volcker Rule on two issues, one providing an extension of time on filing certain reports and the other clarifying whether certain instruments qualify as exempt US government obligations.
The Volcker Rule generally prohibits entities from engaging in proprietary trading or sponsoring or acquiring ownership interests in certain private equity funds. Mandatory compliance deadlines start in July 2015 and the agencies have been issuing guidance periodically in the form of Frequently Asked Questions that appear on each of the agencies’ websites. In order to achieve consistency in interpretations, industry inquiries on Volcker Rule compliance are referred to a committee of representatives of the regulators that issued the rules, with one answer then being adopted by all the regulators.
Extension of time for metrics reporting
Banking entities with $50 billion or more in trading assets and liabilities may continue to report required metrics information within 30 days of the end of the relevant calendar month through the required report for the month of July 2015. Under the regulations, the affected banking entities were to begin reporting the required information within 10 days of the end of the calendar month starting with the report for the month of January 2015.
STRIPS are US government obligations
The Agencies also clarified that the securities known as Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) issued in both interest only and principal only forms, qualify as US government securities exempt from the Volcker Rule’s prohibition on proprietary trading. STRIPS reassembled into one reconstituted security also qualify as exempt US government securities as well.
Access the banking, securities and commodities regulators’ Frequently Asked Questions.
Previous posts on Volcker Rule Frequently Asked Questions
- Regulators clarify FOIA treatment for certain Volcker rule reports
- Regulators provide more Volcker guidance
- Volcker Rule FAQs updated by Federal Reserve Board and OCC
- Volcker Rule FAQs and examination guidelines released