Head over to the Metropolitan Corporate Counsel to read more about the Volcker Rule and how it can affect companies and their compliance programs (and bonus – in-house counsel can subscribe to the print edition of the publication for free):
One overlooked Dodd-Frank Act regulation that non-financial companies should look at is the Volcker Rule banning proprietary trading.
Proprietary trading is when a financial firm uses its own funds, rather than its customer’s funds, to purchase debt instruments, securities, commodities, or derivatives, etc., for potential profit. This form of trading also allows a firm to be a marketmaker, using its proprietary inventory of stocks and bonds to be sold to clients. Following the 2008 financial crisis, some market observers took the position that proprietary trading encouraged inappropriate risk taking, endangering a firm and the financial system.
On January 21, 2010, President Barack Obama proposed a ban on proprietary trading and named it after former Federal Reserve Chairman Paul Volcker, its chief architect. The Dodd-Frank Act included a broader version of the Volcker Rule, including some firms’ hedge fund and private equity activities. Congress mandated that the Volcker Rule go into effect on July 21, 2012, and included some exceptions for market-making activity done on behalf of customers. On October 11, 2011, four of the five regulators tasked with implementation issued a proposed joint rule, which was published in the Federal Register on November 7, 2011. The comment period will close on January 13, 2012.