Vol. 79 Friday,
No. 21 January 31, 2014
Book 2 of 2 Books
Pages 5535–6076
Part II
Department of the Treasury
Office of the Comptroller of the Currency
Board of Governors of the Federal Reserve
System
Federal Deposit Insurance Corporation
Securities and Exchange Commission
12 CFR Parts 44, 248, and 351
17 CFR Part 255
Prohibitions and Restrictions on Proprietary Trading and Certain Interests
in, and Relationships With, Hedge Funds and Private Equity Funds; Final
Rule
VerDate Mar 15 2010 00:29 Jan 31, 2014 Jkt 232001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\BOOK2.LOC BOOK2
sroberts on DSK5SPTVN1PROD with RULES
No. 21 January 31, 2014
Book 2 of 2 Books
Pages 5535–6076
Part II
Department of the Treasury
Office of the Comptroller of the Currency
Board of Governors of the Federal Reserve
System
Federal Deposit Insurance Corporation
Securities and Exchange Commission
12 CFR Parts 44, 248, and 351
17 CFR Part 255
Prohibitions and Restrictions on Proprietary Trading and Certain Interests
in, and Relationships With, Hedge Funds and Private Equity Funds; Final
Rule
VerDate Mar 15 2010 00:29 Jan 31, 2014 Jkt 232001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\BOOK2.LOC BOOK2
sroberts on DSK5SPTVN1PROD with RULES
5536 Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Rules and Regulations
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 44
[Docket No. OCC–2011–0014]
RIN 1557–AD44
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
12 CFR Part 248
[Docket No. R–1432]
RIN 7100 AD82
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 351
RIN 3064–AD85
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 255
[Release No. BHCA–1; File No. S7–41–11]
RIN 3235–AL07
Prohibitions and Restrictions on
Proprietary Trading and Certain
Interests in, and Relationships With,
Hedge Funds and Private Equity Funds
AGENCY: Office of the Comptroller of the
Currency, Treasury (‘‘OCC’’); Board of
Governors of the Federal Reserve
System (‘‘Board’’); Federal Deposit
Insurance Corporation (‘‘FDIC’’); and
Securities and Exchange Commission
(‘‘SEC’’).
ACTION: Final rule.
SUMMARY: The OCC, Board, FDIC, and
SEC (individually, an ‘‘Agency,’’ and
collectively, ‘‘the Agencies’’) are
adopting a rule that would implement
section 13 of the BHC Act, which was
added by section 619 of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act (‘‘Dodd-Frank Act’’).
Section 13 contains certain prohibitions
and restrictions on the ability of a
banking entity and nonbank financial
company supervised by the Board to
engage in proprietary trading and have
certain interests in, or relationships
with, a hedge fund or private equity
fund.
DATES: The final rule is effective April
1, 2014.
FOR FURTHER INFORMATION CONTACT:
OCC: Ursula Pfeil, Counsel, or
Deborah Katz, Assistant Director,
Legislative and Regulatory Activities
Division, (202) 649–5490; Ted Dowd,
Assistant Director, or Roman Goldstein,
Senior Attorney, Securities and
Corporate Practices Division, (202) 649–
5510; Kurt Wilhelm, Director for
Financial Markets Group, (202) 649–
6360; Stephanie Boccio, Technical
Expert for Credit and Market Risk
Group, (202) 649–6360, Office of the
Comptroller of the Currency, 250 E
Street SW., Washington, DC 20219.
Board: Christopher M. Paridon,
Counsel, (202) 452–3274, or Anna M.
Harrington, Senior Attorney, Legal
Division, (202) 452–6406; Mark E. Van
Der Weide, Deputy Director, Division of
Bank Supervision and Regulation, (202)
452–2263; or Sean D. Campbell, Deputy
Associate Director, Division of Research
and Statistics, (202) 452–3760, Board of
Governors of the Federal Reserve
System, 20th and C Streets NW.,
Washington, DC 20551.
FDIC: Bobby R. Bean, Associate
Director, bbean@fdic.gov, or Karl R.
Reitz, Chief, Capital Markets Strategies
Section, kreitz@fdic.gov, Capital
Markets Branch, Division of Risk
Management Supervision, (202) 898–
6888; Michael B. Phillips, Counsel,
mphillips@fdic.gov, or Gregory S. Feder,
Counsel, gfeder@fdic.gov, Legal
Division, Federal Deposit Insurance
Corporation, 550 17th Street NW.,
Washington, DC 20429.
SEC: Josephine J. Tao, Assistant
Director, Angela R. Moudy, Branch
Chief, John Guidroz, Branch Chief,
Jennifer Palmer or Lisa Skrzycki,
Attorney Advisors, Office of Trading
Practices, Catherine McGuire, Counsel,
Division of Trading and Markets, (202)
551–5777; W. Danforth Townley,
Attorney Fellow, Jane H. Kim, Brian
McLaughlin Johnson or Marian Fowler,
Senior Counsels, Division of Investment
Management, (202) 551–6787; David
Beaning, Special Counsel, Office of
Structured Finance, Division of
Corporation Finance, (202) 551–3850;
John Cross, Office of Municipal
Securities, (202) 551–5680; or Adam
Yonce, Assistant Director, or Matthew
Kozora, Financial Economist, Division
of Economic and Risk Analysis, (202)
551–6600, U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Notice of Proposed Rulemaking
III. Overview of Final Rule
A. General Approach and Summary of
Final Rule
B. Proprietary Trading Restrictions
C. Restrictions on Covered Fund Activities
and Investments
D. Metrics Reporting Requirement
E. Compliance Program Requirement
IV. Final Rule
A. Subpart B—Proprietary Trading
Restrictions
1. Section ll.3: Prohibition on
Proprietary Trading and Related
Definitions
a. Definition of ‘‘Trading Account’’
b. Rebuttable Presumption for the Short-
Term Trading Account
c. Definition of ‘‘Financial Instrument’’
d. Proprietary Trading Exclusions
1. Repurchase and Reverse Repurchase
Arrangements and Securities Lending
2. Liquidity Management Activities
3. Transactions of Derivatives Clearing
Organizations and Clearing Agencies
4. Excluded Clearing-Related Activities of
Clearinghouse Members
5. Satisfying an Existing Delivery
Obligation
6. Satisfying an Obligation in Connection
With a Judicial, Administrative, Self-
Regulatory Organization, or Arbitration
Proceeding
7. Acting Solely as Agent, Broker, or
Custodian
8. Purchases or Sales Through a Deferred
Compensation or Similar Plan
9. Collecting a Debt Previously Contracted
10. Other Requested Exclusions
2. Section ll.4(a): Underwriting
Exemption
a. Introduction
b. Overview
1. Proposed Underwriting Exemption
2. Comments on Proposed Underwriting
Exemption
3. Final Underwriting Exemption
c. Detailed Explanation of the
Underwriting Exemption
1. Acting as an Underwriter for a
Distribution of Securities
a. Proposed Requirements That the
Purchase or Sale Be Effected Solely in
Connection With a Distribution of
Securities for Which the Banking Entity
Acts as an Underwriter and That the
Covered Financial Position be a Security
i. Proposed Definition of ‘‘Distribution’’
ii. Proposed Definition of ‘‘Underwriter’’
iii. Proposed Requirement That the
Covered Financial Position Be a Security
b. Comments on the Proposed
Requirements That the Trade Be Effected
Solely in Connection With a Distribution
for Which the Banking Entity Is Acting
as an Underwriter and That the Covered
Financial Position Be a Security
i. Definition of ‘‘Distribution’’
ii. Definition of ‘‘Underwriter’’
iii. ‘‘Solely in Connection With’’ Standard
c. Final Requirement That the Banking
Entity Act as an Underwriter for a
Distribution of Securities and the
Trading Desk’s Underwriting Position Be
Related to Such Distribution
i. Definition of ‘‘Underwriting Position’’
ii. Definition of ‘‘Trading Desk’’
iii. Definition of ‘‘Distribution’’
iv. Definition of ‘‘Underwriter’’
v. Activities Conducted ‘‘in Connection
With’’ a Distribution
2. Near Term Customer Demand
Requirement
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sroberts on DSK5SPTVN1PROD with RULES
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 44
[Docket No. OCC–2011–0014]
RIN 1557–AD44
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
12 CFR Part 248
[Docket No. R–1432]
RIN 7100 AD82
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 351
RIN 3064–AD85
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 255
[Release No. BHCA–1; File No. S7–41–11]
RIN 3235–AL07
Prohibitions and Restrictions on
Proprietary Trading and Certain
Interests in, and Relationships With,
Hedge Funds and Private Equity Funds
AGENCY: Office of the Comptroller of the
Currency, Treasury (‘‘OCC’’); Board of
Governors of the Federal Reserve
System (‘‘Board’’); Federal Deposit
Insurance Corporation (‘‘FDIC’’); and
Securities and Exchange Commission
(‘‘SEC’’).
ACTION: Final rule.
SUMMARY: The OCC, Board, FDIC, and
SEC (individually, an ‘‘Agency,’’ and
collectively, ‘‘the Agencies’’) are
adopting a rule that would implement
section 13 of the BHC Act, which was
added by section 619 of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act (‘‘Dodd-Frank Act’’).
Section 13 contains certain prohibitions
and restrictions on the ability of a
banking entity and nonbank financial
company supervised by the Board to
engage in proprietary trading and have
certain interests in, or relationships
with, a hedge fund or private equity
fund.
DATES: The final rule is effective April
1, 2014.
FOR FURTHER INFORMATION CONTACT:
OCC: Ursula Pfeil, Counsel, or
Deborah Katz, Assistant Director,
Legislative and Regulatory Activities
Division, (202) 649–5490; Ted Dowd,
Assistant Director, or Roman Goldstein,
Senior Attorney, Securities and
Corporate Practices Division, (202) 649–
5510; Kurt Wilhelm, Director for
Financial Markets Group, (202) 649–
6360; Stephanie Boccio, Technical
Expert for Credit and Market Risk
Group, (202) 649–6360, Office of the
Comptroller of the Currency, 250 E
Street SW., Washington, DC 20219.
Board: Christopher M. Paridon,
Counsel, (202) 452–3274, or Anna M.
Harrington, Senior Attorney, Legal
Division, (202) 452–6406; Mark E. Van
Der Weide, Deputy Director, Division of
Bank Supervision and Regulation, (202)
452–2263; or Sean D. Campbell, Deputy
Associate Director, Division of Research
and Statistics, (202) 452–3760, Board of
Governors of the Federal Reserve
System, 20th and C Streets NW.,
Washington, DC 20551.
FDIC: Bobby R. Bean, Associate
Director, bbean@fdic.gov, or Karl R.
Reitz, Chief, Capital Markets Strategies
Section, kreitz@fdic.gov, Capital
Markets Branch, Division of Risk
Management Supervision, (202) 898–
6888; Michael B. Phillips, Counsel,
mphillips@fdic.gov, or Gregory S. Feder,
Counsel, gfeder@fdic.gov, Legal
Division, Federal Deposit Insurance
Corporation, 550 17th Street NW.,
Washington, DC 20429.
SEC: Josephine J. Tao, Assistant
Director, Angela R. Moudy, Branch
Chief, John Guidroz, Branch Chief,
Jennifer Palmer or Lisa Skrzycki,
Attorney Advisors, Office of Trading
Practices, Catherine McGuire, Counsel,
Division of Trading and Markets, (202)
551–5777; W. Danforth Townley,
Attorney Fellow, Jane H. Kim, Brian
McLaughlin Johnson or Marian Fowler,
Senior Counsels, Division of Investment
Management, (202) 551–6787; David
Beaning, Special Counsel, Office of
Structured Finance, Division of
Corporation Finance, (202) 551–3850;
John Cross, Office of Municipal
Securities, (202) 551–5680; or Adam
Yonce, Assistant Director, or Matthew
Kozora, Financial Economist, Division
of Economic and Risk Analysis, (202)
551–6600, U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Notice of Proposed Rulemaking
III. Overview of Final Rule
A. General Approach and Summary of
Final Rule
B. Proprietary Trading Restrictions
C. Restrictions on Covered Fund Activities
and Investments
D. Metrics Reporting Requirement
E. Compliance Program Requirement
IV. Final Rule
A. Subpart B—Proprietary Trading
Restrictions
1. Section ll.3: Prohibition on
Proprietary Trading and Related
Definitions
a. Definition of ‘‘Trading Account’’
b. Rebuttable Presumption for the Short-
Term Trading Account
c. Definition of ‘‘Financial Instrument’’
d. Proprietary Trading Exclusions
1. Repurchase and Reverse Repurchase
Arrangements and Securities Lending
2. Liquidity Management Activities
3. Transactions of Derivatives Clearing
Organizations and Clearing Agencies
4. Excluded Clearing-Related Activities of
Clearinghouse Members
5. Satisfying an Existing Delivery
Obligation
6. Satisfying an Obligation in Connection
With a Judicial, Administrative, Self-
Regulatory Organization, or Arbitration
Proceeding
7. Acting Solely as Agent, Broker, or
Custodian
8. Purchases or Sales Through a Deferred
Compensation or Similar Plan
9. Collecting a Debt Previously Contracted
10. Other Requested Exclusions
2. Section ll.4(a): Underwriting
Exemption
a. Introduction
b. Overview
1. Proposed Underwriting Exemption
2. Comments on Proposed Underwriting
Exemption
3. Final Underwriting Exemption
c. Detailed Explanation of the
Underwriting Exemption
1. Acting as an Underwriter for a
Distribution of Securities
a. Proposed Requirements That the
Purchase or Sale Be Effected Solely in
Connection With a Distribution of
Securities for Which the Banking Entity
Acts as an Underwriter and That the
Covered Financial Position be a Security
i. Proposed Definition of ‘‘Distribution’’
ii. Proposed Definition of ‘‘Underwriter’’
iii. Proposed Requirement That the
Covered Financial Position Be a Security
b. Comments on the Proposed
Requirements That the Trade Be Effected
Solely in Connection With a Distribution
for Which the Banking Entity Is Acting
as an Underwriter and That the Covered
Financial Position Be a Security
i. Definition of ‘‘Distribution’’
ii. Definition of ‘‘Underwriter’’
iii. ‘‘Solely in Connection With’’ Standard
c. Final Requirement That the Banking
Entity Act as an Underwriter for a
Distribution of Securities and the
Trading Desk’s Underwriting Position Be
Related to Such Distribution
i. Definition of ‘‘Underwriting Position’’
ii. Definition of ‘‘Trading Desk’’
iii. Definition of ‘‘Distribution’’
iv. Definition of ‘‘Underwriter’’
v. Activities Conducted ‘‘in Connection
With’’ a Distribution
2. Near Term Customer Demand
Requirement
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sroberts on DSK5SPTVN1PROD with RULES