Dodd-Frank - Interim final rule on treatment of certain securities under Volcker rule 

January 17:  Various regulatory agencies recently adopted an interim final rule on the treatment of certain collateralized debt obligations backed by trust preferred securities (TruPS CDOs) section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), also known as the Volcker Rule.

The agencies issued on January 14, 2014, the interim final rule to reconcile the relevant provisions of the Volcker Rule with the Collins Amendment by allowing certain TruPS CDOs to be permitted investments under the Volcker Rule.


The interim final rule clarifies that the relief relating to permitted TruPS CDOs also extends to activities of a banking entity that acts as a sponsor for these securitization vehicles. A banking entity may act as a market maker with respect to the interests of a qualifying issuer of TruPS CDOs in accordance with the applicable provisions of the Volcker Rule.

Background

The Volcker Rule was adopted by the agencies on December 10, 2013. Among other things, the Volcker Rule restricts banking entities and their affiliates from investing in and sponsoring covered funds. The final rule implementing the Volcker Rule defines covered funds as pooled investment vehicles, which includes many TruPS CDOs. Investments in covered funds must be divested by July 21, 2015, which is the end of the Volcker Rule conformance period. Read TaxNewsFlash-United States (January 3, 2014)

Effective date

The interim final rule is effective on April 1, 2014. Comments on the interim final rule must be received on or before 30 days after publication in the Federal Register.


Read a January 2014 report [PDF 191 KB] prepared by KPMG LLP: Defining Issues: Rule Issued on Treatment of TruPS CDOs under Volcker Rule




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