Comment Periods for Volcker Rule, ABS Conflicts Proposal Extended


Government officials on Friday approved a 30-day extension of the public comment period for a proposal to implement regulation known as the Volcker Rule.

In addition, the SEC issued the same extension for a regulation known as the ABS Conflicts Proposal.

Both proposals are part of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The comment periods for both regulations were scheduled to end Jan. 13. The deadline for the Volcker Rule proposal was extended in order to allow commenters sufficient time to digest and respond to its complex requirements, the SEC said.

The SEC also extended the ABS Conflicts Proposal deadline to allow the public to consider potential interplay with the Volcker Rule. The comment periods for the proposals will end Feb. 13.

The extension was approved by the SEC, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. But SEC commissioners Daniel Gallagher and Troy Paredes issued a statement saying the 30-day extension isn’t long enough because the Volcker Rule proposal is so complex.

“This proposal . . . has the potential to dramatically and irrevocably impact the U.S. financial markets,” Gallagher and Paredes said in their statement. “Accordingly, the comment period extension should have been longer to help ensure the integrity and soundness of the rulemaking process.”

Regulators are required by the Dodd-Frank Act to prohibit and restrict banking entities and nonbank financial companies from engaging in proprietary trading and having certain interests in or relationships with hedge funds or private equity funds, with certain exceptions.

This regulation is named after former Federal Reserve Chairman Paul Volcker, a proponent of the proposal. It is designed to prevent banks from investing in certain high-risk securities.

The ABS Conflicts Proposal prohibits conflicts of interest in certain securitizations. It would prohibit certain persons who create and distribute an asset-backed security from engaging in transactions that would create a conflict of interest with respect to any of the investors in the security. The rule would provide exceptions for certain risk-mitigating hedge activities, liquidity commitments and bona fide market making.

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