Hedge Funds

By Derrick Cephas & Dimia Fogam

On March 22, 2013, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the “bank regulators”) released their final guidance on leveraged lending activities.1 The final guidance does not deviate significantly from the proposed guidance released last year on March 26, 2012, but does attempt to provide clarity in response to the many comment letters relating to the proposed guidance received by the bank regulators. The final guidance is the latest revision and update to the interagency leveraged finance guidance first issued in April 2001.2
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Two years ago, on July 21, 2010, President Obama signed into law a package of financial regulatory reforms unparalleled in scope and depth since the New Deal. The Dodd-Frank Act was intended to restructure the regulatory framework for the US financial system, with broad and deep implications for the financial services industry where the crisis started. But its impact also was intended to be felt well beyond the financial sector, extending federal regulation into areas of corporate governance applicable to all US public companies.

Few provisions of the Dodd-Frank Act took effect in the summer of 2010. Instead, the specifics of the Act were intended to be developed through the federal rulemaking process, as the Act mandated the development and implementation of nearly 400 separate regulations to be enacted by, or coordinated among, nearly a dozen federal departments or agencies. To date, the deadlines for more than half of the required rulemakings have expired. But even with these delays, the last two years have witnessed the promulgation of more than 100 rules and the issuance of many additional proposed regulations for public comment. This Report discusses the many strides that have been made pursuant to the Act to date and forecasts what is yet to come.

Click here for a PDF of the full report.

Heath P. Tarbert, partner and head of Weil’s Financial Regulatory Reform Working Group, was quoted on BankDirector.com regarding the predicted effect of the Dodd-Frank Act’s Volcker rule. The Volcker rule goes into effect next month and will place two significant restrictions on financial institutions: (1) a prohibition on proprietary trading; and (2) a ban on certain hedge fund and private equity activities.

Mr. Tarbert was quoted as follows: 

I am generally skeptical of the Volcker rule’s purposed benefits to bank safety and soundness. I think appropriate capital, leverage, and liquidity requirements—when combined with a robust risk management framework and culture inside each institution—will do far more to lower the risk profile of large banks. Moreover, the Volcker rule in its current form only compounds the problem by requiring regulators and market participants to make, in some cases, spurious distinctions between and among proprietary trading, market making and hedging.

The June 26, 2012 article, entitled “Volcker Rule: Hero or Villain?” was written by Kelsey Weaver and was published on BankDirector.com.

By Heath Tarbert and Dimia Fogam

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) released for public comment their proposed joint guidance on leveraged lending activities.

The proposed guidance is a revision to the interagency leveraged finance guidance issued in 2001 and would apply to all OCC-, FRB- and FDIC-supervised financial institutions that are substantively engaged in leveraged lending activities—such as those common to the private equity and hedge fund lending market. 

Given the immense growth in the volume of leveraged credit as well as the increased participation of non-regulated investors over the last decade, the Agencies have expressed concerns that [click to continue…]

The October 25, 2011 webinar titled “The Volcker Rule’s Impact on Private Funds: Recent Rulemakings and Market Trends” is now available on demand.

The program featured Weil’s Harvey Eisenberg, Derrick Cephas, and Heath Tarbert and addressed recent and forthcoming rules pursuant to the Dodd-Frank Act’s Volcker Rule (Section 619) whereby large, systemically important banks will have to divest certain fund operations.