Volcker 2.0 Covered-Funds Rule

The banking agencies, SEC, and CFTC have finalized a long-awaited, complex, and comprehensive proposal1 rolling back many of the restrictions on covered funds imposed in the 2013 rules implementing the Volcker Rule provisions of the Dodd-Frank Act.2 Strongly opposed by those who fear greater integration of banking and “speculative” finance or commerce, the rule liberalizes the “Super 23A” inter-affiliate transaction restrictions on excluded covered funds that limited their ability to benefit from funding and operational capacity within affiliated insured depositories. Foreign banking organizations (FBOs) also gain considerably through final codification and expansion of longstanding exemptions for certain covered-fund activities that conflict with home- or other host-country rules. Classes of newly-permissible funds include credit funds which integrate bank-credit functions with capital-markets and asset- management opportunities.