Regulators issued the final Volcker Rule regulations on December 10, 2013. While the Volcker Rule will remain a significant impediment to raising capital from U.S. banking entities, the final Volcker Rule regulations responded favorably to many of the points raised by the PEGCC in the comment process. In particular, insurance company general accounts and separate accounts are not subject to the restrictions on investing in private equity funds. In addition, the final regulations state that a banking entity is not subject to the restrictions on investing in private equity funds where it is acting in a fiduciary or similar capacity on behalf of its customers. The final regulations also preserve the ability of U.S. private equity firms to sponsor non-U.S. funds with investors that include non-U.S. banking entities and appear to preserve the flexibility of U.S. private equity firms to include such non-U.S. funds into parallel fund structures. In addition, the regulations extend the general conformance period to July 21, 2015. The regulations also altered the definition of “U.S. person” for the purposes of the Volcker Rule so that it would be identical to the SEC’s definition of U.S. person in Regulation S as the PEGCC advocated. U.S. banking entities remain generally limited to investing through so-called “bank customer funds,” in which the U.S. banking entity may only invest 3% of the fund’s capital. Overall, the PEGCC appears to have obtained most of the favorable changes we requested during the Volcker Rule comment process. Our efforts should make the Volcker Rule substantially and appropriately easier for private equity funds and many of their limited partners to deal with going forward.
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