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Implementing the Volcker Rule: The Covered Fund Restrictions

This is the second of a two-part series exploring the requirements and issues for compliance with the final Volcker rule regulation issued by five federal agencies on Dec. 10, 2013. This article discusses the interagency final regulation’s treatment of the Volcker rule restrictions on the ability of a banking entity to sponsor or have an ownership interest in ‘‘covered funds,’’ including hedge funds and private equity funds. In addition, the article discusses the statutory and regulatory exclusions to ‘‘covered fund’’ treatment and available exemptions for certain permitted activities under the Volcker rule. Finally, the article discusses certain additional restrictions imposed on the activities of a banking entity and its affiliates, other potential prohibitions, fund structuring considerations, and potential challenges for implementing, supervising and complying with the requirements of the final regulation.

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