The Financial Stability Oversight Council (FSOC) has asked for views on how regulators should implement the prohibitions — commonly called the Volcker Rule — on proprietary trading and certain investments by banking organizations mandated in the Dodd-Frank Act (DFA). The Volcker Rule was among the DFA’s most hotly-contested provisions, with large banking organizations strongly protesting it and advocates, including the Obama Administration, countering that the Rule’s prohibitions are essential to curbing risks and conflicts of interest they believe contributed to the financial-market crisis. As finally enacted, the Volcker Rule remains tough, with many types of proprietary trading and investments in hedge funds and private-equity (PE) firms flatly banned. However, the law does provide considerable flexibility to affect the final shape of these prohibitions based on implementing rules, rules that must be shaped in accordance with FSOC recommendations following this study.
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