(CN) - Federal financial agencies say they will coordinate a review of potential "unintended consequence(s)" of the Volcker rule, which could keep certain financial funds from investment trading in the United States.
United States banking agencies will delay enforcement of regulations under the rule for a year as they affect foreign funds issued by foreign banks, they said in a press release.
In an emailed statement to Courthouse News, Eric Kollig with the Federal Reserve Board clarified the move.
"Foreign firms can issue or invest in different types of investment funds. And when those funds are issued in the United States, they are subject to the restrictions in the Volcker rule. ?However, certain foreign funds from foreign banks may be subject to the Volcker rule due to complexities in the law," he wrote. "As a result, the five agencies said that for that subset of foreign funds issued by foreign banks, they would not take action for one year if the funds do not comply with the Volcker rule."
The five financial agencies coordinating reviews are the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Commodity Futures Trading Commission, and Securities and Exchange Commission. The banking agencies are the first three.
The Volcker rule generally prohibits "insured depository institutions and any company affiliated with an insured depository institution" from trading with its own money, and from "acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a covered fund" (i.e., a hedge fund or private equity fund), according to the press release. Foreign investment funds not associated with a bank are meant to be exempted.
The agencies, which in 2013 under the Barack Obama Administration issued the regulations implementing the Volker rule, or section 619 of the Dodd-Frank Act, now say that "complexities in the statute and the implementing regulations may result in certain foreign excluded funds becoming subject to regulation under section 619 because of governance arrangements with or investments by a foreign bank. As a result, a number of foreign banking entities, foreign government officials, and other market participants have expressed concern about possible unintended consequences and extraterritorial impact."
The agencies are considering amending the regulations, "or other appropriate action" including Congressional action to make it right.