The Federal Reserve Board (FRB) has issued additional details on how banking entities should apply for an extension to conform investments in illiquid funds with the Volcker Rule.
On December 12, 2016, the FRB published additional details on how banking entities should apply for an extension to conform investments in illiquid funds with the Volcker Rule (12 U.S.C. § 1851).
The Volcker Rule – created under Section 619 of the Dodd-Frank Act – authorizes the FRB to provide an additional period of up to five years beyond the maximum statutory extensions for a banking entity to conform investments in certain legacy illiquid funds. This is the last conformance period extension that the FRB is authorized to provide banking entities under the statute. Illiquid funds are funds principally invested in real estate, portfolio companies, or venture capital investments that were in place before May 1, 2010 (12 U.S.C. § 1851(h)(7)).
The new details explain that banking entities seeking to take advantage of this extension must provide to the appropriate Reserve Bank by January 22, 2017:
A list and short description of each fund for which the extension is sought.
A description of the entity’s efforts to divest from the funds or conform.
A certification by the chief compliance officer or general counsel of the entity that the fund meets the definition of illiquid funds and that the investment was made prior to May 1, 2010.
The length of the requested extension and the divestment plan for each covered fund.
The extension granted will be for the shortest of:
Five years from July 21, 2017.
The date the covered fund is expected to mature or conform by its terms.