• A Critical Analysis of the Potential Impact of the Volcker Rule on Municipal Bonds
  • December 20, 2011 | Authors: Scott A. Cammarn; Steven David Lofchie; Jed Benjamin Miller; Lary Stromfeld
  • Law Firms: Cadwalader, Wickersham & Taft LLP - New York Office ; Cadwalader, Wickersham & Taft LLP - Charlotte Office ; Cadwalader, Wickersham & Taft LLP - New York Office
  • Federal regulators (the “Agencies”) recently issued a notice of proposed rulemaking (the “Proposal”) under Section 619 of the Dodd-Frank Act, commonly known as the “Volcker Rule.” The Volcker Rule generally restricts banks and all of their affiliates (collectively, “banking entities”) from engaging in proprietary trading activities, subject to exemptions that include proprietary transactions in securities that are “obligations of any State or of any political subdivision thereof.” The Volcker Rule also restricts banking entities from investing in or sponsoring “hedge funds” or “private equity funds,” although it defines those terms to encompass a far broader range of entities than those commonly thought of as hedge funds or private equity funds. For example, for purposes of the Volcker Rule, these terms include special purpose vehicles used in securitizations and financings. In addition, the Volcker Rule prohibits certain transactions between a banking entity and any “hedge fund” or “private equity fund” for which the banking entity or any of its affiliates is the investment adviser, investment manager, or sponsor. The Volcker Rule is scheduled to go into effect on July 21, 2012, although banking entities will have until July 21, 2014 (and possibly longer through Federal Reserve Board extensions) to bring their activities into compliance.