The Volcker Rule (“Volcker Rule” or “Rule”) is intended to limit risks to the financial system that Congress believes may be created by (i) proprietary trading operations of insured depository institutions, foreign banking entities with certain U.S. operations, and the affiliates of the foregoing entities (collectively, “banking entities”) through a set of “Trading Restrictions,” and (ii) investments and certain relationships between banking entities and private equity and hedge funds (which are referred to as “covered funds”) through a set of “Fund Restrictions.”

The Volcker Rule itself comprises only 11 pages of a nearly 850-page law. It has been, however, one of the most controversial parts of the Dodd-Frank Act (“DFA”), as demonstrated by the long delays, thousands of comments and arduous path taken by the five federal regulatory agencies – the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the Office of the Comptroller of the Currency (“OCC”), the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) (together, the “Agencies”) – to agree on final implementing regulations.

Congress had expected that the final Volcker Rule regulations would be issued by October 2011 and become effective on July 21, 2012. In April 2012, the FRB, which is given authority to issue rules and make determinations regarding conformance periods for activities and investments subject to the Volcker Rule, clarified that banking entities would generally have two years from July 21, 2012 to conform to the requirements of the Volcker Rule. During the conformance period, banking entities were expected to engage in good faith efforts to achieve conformance of all activities and investments by no later than the end of that period.