AIMA

Named after Paul Volcker, former Chairman of the Board of Governors of the Federal Reserve System, The Volcker Rule is contained within Section 619 of the Dodd-Frank Act. The Rule seeks generally to prohibit ‘banking entities’ from conducting ‘proprietary trading’ and from ‘sponsoring’ or acquiring ‘any equity, partnership or other ownership interest’ in a private equity or hedge fund. The Rule was introduced in response to the financial crisis and becomes effective on 21 July 2012, subject to a two year ‘Conformance Period’ for the industry.

The Rule does not apply with respect to: 

• trading of securities and other instruments in connection with underwriting or market making related activities;
• risk-mitigating hedging activities in connection with and related to individual or aggregated positions, contracts, or other holdings;
• trading activities conducted solely outside the US by companies that are not directly or indirectly controlled by a company organised under US law;
• trading on behalf of customers;
• trading of certain government obligations; and
• certain trading activities by regulated insurance companies.

Consultation documents

Proposed Rulemaking - Prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds (October 2011) 

FSOC Request for Information Regarding the Implementation of the Prohibitions on Proprietary Trading and Certain Relationships with Hedge Funds and Private Equity Funds required under Section 619 the Dodd-Frank Wall Street Reform and Consumer Protection Act (October 2010)

AIMA documents

Response to Proposed Rulemaking - Prohibition and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds, notice of proposed rulemaking (February 2012)

Response to FSOC consultation on the Volcker Rule (November 2010)