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Monday, March 7, 2016

ABA, SIFMA Seek Fed Action on Illiquid Fund Conformance Period

ABA and the Securities Industry and Financial Markets Association last week urged the Federal Reserve to revise its conformance period for illiquid funds under the Volcker Rule. Congress authorized a five-year conformance period beyond the Volcker Rule compliance date for illiquid funds in existence before May 1, 2010.

“A number of the remaining legacy fund positions held by banking entities are highly illiquid and thus extremely difficult to sell or otherwise bring into conformance by the applicable conformance deadline,” ABA and SIFMA said, noting that the Fed’s conformance rule instituted an unnecessarily narrow definition for the illiquid funds at hand.

The groups added:
[W]ithout further action by the board or its staff to make the extended conformance period available for these illiquid funds, banking entities would need to undertake conformance measures that could cause harm to unaffiliated investors in the funds, disrupt the illiquid portfolio companies held by these illiquid funds, negatively impact secondary markets for fund interests and impose unnecessary costs on banking entities without furthering any policy goal of the Volcker Rule.

Read the letter.

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