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From Securities Regulation Daily, December 9, 2013

Regulators set to issue Volcker Rule

By Mark S. Nelson, J.D.

The five financial regulators charged with drafting the Volcker Rule have jointly announced that the rule will make its public debut Tuesday, December 10, 2013, more than two years after it was first proposed. The rule, whose namesake is 1980s-era Fed Chairman Paul A. Volcker, would prohibit banking entities from engaging in proprietary trading or owning, or sponsoring hedge funds or private equity funds unless they meet the criteria for permitted activities. The agencies will hold a press briefing on the rule tomorrow at 8:00 a.m. at the FDIC’s Washington D.C. headquarters.

At today’s meeting of the Financial Stability Oversight Council (FSOC), Treasury Secretary Jacob J. Lew, who is also FSOC’s chair, said, “Hopefully we are on the verge of seeing the Volcker rule completed.” CTFC chair and FSOC member, Gary Gensler, while remarking to FSOC members on his last public meeting as the CFTC’s chair, said that tomorrow regulators would “bring an important rule across the finish line,” a reference to the Volcker rule.

Secretary Lew last week characterized a draft of the Volcker rule as “tough” and consistent with both the law’s intent and the Obama Administration’s vision. According to Secretary Lew, the final rule would bar trades that are not truly risk-mitigating hedges, such as J.P. Morgan Chase & Co.’s “London Whale” trades. Secretary Lew also said the rule will include “strong compliance requirements” that ensure the proper “tone at the top” from financial institution leaders.

Things to look for in the final Volcker Rule include how much it varies from the October 2011 proposal and if it contains any new items. The definition of “market making” will be a key to the rule’s implementation as will the amount of time firms have to comply with the rule. Legal challenges to the rule also could impact its implementation.

Companies: J.P. Morgan Chase & Co.

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