Regulatory Alerts2014-01-31 | 2014-02019Treatment of Certain Collateralized Debt Obligations Backed Primarily by Trust Preferred Securities With Regard to Prohibitions and Restrictions on Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds
The OCC, Board of Governors of the Federal Reserve System, FDIC, CFTC, and SEC adopted a joint interim final rule permitting banking entities to retain investments in certain pooled vehicles backed primarily by grandfathered trust preferred securities. This exemption allows banking entities to sponsor or hold interests in these collateralized debt obligations if they were established before May 19, 2010, and primarily invested in qualifying securities issued by small community banking organizations. The rule serves as a companion to the Volcker Rule final rules to ensure that prohibitions on hedge fund and private equity fund investments do not undermine the statutory grandfathering of specific capital instruments under the Dodd-Frank Act.
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