January 6 2014

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OLCKER ULE EDGE UNDS RIVATE QUITY UNDS,January 6 2014. www volckerrule com, These Davis Polk flowcharts are designed to assist The flowcharts graphically map the key elements of the. banking entities in identifying permissible and covered fund provisions in the final regulations An. impermissible covered fund activities investments and introduction to the new covered funds compliance. relationships under the final regulations implementing requirements will also be available soon as a stand. the Volcker Rule issued by the Federal Reserve FDIC alone module and in a single combined document. OCC SEC and CFTC on December 10 2013, Davis Polk s proprietary trading flowcharts are available. at www volckerrule com,SAMPLE GRAPHIC,IS A BANKING ENTITY. ACQUIRING OR RETAINING AS, DO ONE OF THE EXCLUSIONS IS THE ACTIVITY A PERMITTED.
PRINCIPAL AN OWNERSHIP IS THE ACTIVITY PRECLUDED BY. YES FROM THE DEFINITION OF NO ACTIVITY UNDER THE VOLCKER YES. INTEREST IN A COVERED FUND A BACKSTOP PROHIBITION,COVERED FUND APPLY RULE. OR ACTING AS SPONSOR OF A,COVERED FUND,NO NO YES NO. ACTIVITY IS NOT WITHIN ACTIVITY IS PROHIBITED ACTIVITY IS PERMITTED. THE SCOPE OF THE YES UNDER THE VOLCKER UNDER THE VOLCKER. VOLCKER RULE RULE RULE,IS A BANKING ENTITY ENTERING. IS IT A PRIME BROKERAGE,INTO A COVERED,TRANSACTION WITH A COVERED. TRANSACTION WITH A RELATED,YES FUND IN WHICH THE RELATED YES.
COVERED FUND OR A COVERED,COVERED FUND HAS MADE AN. FUND CONTROLLED BY SUCH,INVESTMENT,RELATED FUND, 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com. OLCKER ULE EDGE UNDS RIVATE QUITY UNDS,January 6 2014. www volckerrule com,SLIDE SLIDE, VOLCKER RULE COVERED FUNDS OVERVIEW 1 PERMITTED ACTIVITIES. WHAT IS A BANKING ENTITY 2 ASSET MANAGEMENT EXEMPTION 24. ABS ISSUER EXEMPTION 25,WHAT IS A U S ORGANIZED OR LOCATED BANKING ENTITY.
UNDERWRITING AND MARKET MAKING 26,BANKING ENTITIES WITH A U S TOP TIER PARENT 3. INVESTMENT LIMITS,BANKING ENTITIES WITH A FOREIGN TOP TIER PARENT 4. o 3 PER FUND LIMIT, WHAT IS A COVERED FUND ASSET MANAGEMENT EXEMPTION 27. DEFINITION OF A COVERED FUND 5 ABS ISSUER EXEMPTION 28. EXCLUSIONS FROM THE DEFINITION OF COVERED FUND 6 o AGGREGATE 3 OF TIER 1 CAPITAL LIMIT AND CAPITAL DEDUCTION 29. o ATTRIBUTION RULES,WHAT IS AN OWNERSHIP INTEREST,GENERALLY 30. DEFINITION OF AN OWNERSHIP INTEREST 7,MULTI TIER FUNDS AND PARALLEL INVESTMENTS 31.
EXCLUSION FOR RESTRICTED PROFIT INTEREST CARRIED INTEREST 8. SEEDING 32, WHEN IS AN OWNERSHIP INTEREST NOT HELD AS PRINCIPAL 9 RISK MITIGATING HEDGING OF EMPLOYEE COMPENSATION 33. OFFSHORE EXEMPTION 34,WHAT IS A SPONSOR OF A COVERED FUND 10. REGULATED INSURANCE COMPANIES 35, EXCLUSIONS FROM THE DEFINITION OF COVERED FUND DO THE SUPER 23A RESTRICTIONS APPLY 36. RIC OR BDC 11, EXCLUDED PRIVATE FUND U S OR FOREIGN 12 IS AN OTHERWISE PERMITTED ACTIVITY PRECLUDED BY A BACKSTOP. FOREIGN PUBLIC FUND 13 PROHIBITION 37,FOREIGN PENSION FUND 14 CONFORMANCE PERIOD 38.
WHOLLY OWNED SUBSIDIARY 15,JOINT VENTURE 16 DAVIS POLK CONTACTS 39. ACQUISITION VEHICLE 17,LOAN SECURITIZATION 18,ABCP CONDUIT 19. COVERED BOND ENTITIES 20,SBIC OR PUBLIC WELFARE INVESTMENT FUND 21. INSURANCE COMPANY SEPARATE ACCOUNT 22,BANK OWNED LIFE INSURANCE 23. 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com. OLCKER ULE OVERED UNDS VERVIEW, Is a banking entity engaged in any of the following activities.
GENERAL PROHIBITION SUPER 23A, Acquiring or retaining as ACTIVITY IS NOT WITHIN Entering into a covered. principal an ownership interest THE SCOPE OF THE NO transaction with a related. in a covered fund VOLCKER RULE covered fund or a covered fund. Acting as sponsor of a covered controlled by such related. fund covered fund,YES NO YES,EXCLUSIONS,TIERED COMPLIANCE. Does one of the exclusions from YES PROGRAM AND REPORTING YES. the definition of covered fund REQUIREMENTS APPLY PRIME BROKERAGE EXCEPTION. Is the covered transaction a,prime brokerage,NO transaction with a covered. fund in which the related,covered fund has made an. PERMITTED ACTIVITIES ACTIVITY IS PROHIBITED investment. Is the activity a permitted NO UNDER THE VOLCKER NO. activity under the Volcker Rule RULE, IS THE ACTIVITY PRECLUDED BY A BACKSTOP PROHIBITION.
Material conflict of interest between the banking entity and its clients customers or counterparties. Material exposure of the banking entity to high risk assets or trading strategies. Threat to the safety and soundness of the banking entity or to U S financial stability. TIERED COMPLIANCE ACTIVITY IS PERMITTED,PROGRAM AND REPORTING UNDER THE VOLCKER. REQUIREMENTS APPLY RULE, 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com 1. HAT S A ANKING NTITY ENTITY,An insured depository, DOES THE INSURED DEPOSITORY INSTITUTION FUNCTION SOLELY IN A TRUST. OR FIDUCIARY CAPACITY,1 institution, Substantially all of its deposits are in trust funds and are received RICS BDCS OR FOREIGN PUBLIC FUNDS. in a bona fide fiduciary capacity, None of its insured deposits are offered or marketed by or Although the term banking entity is defined in the.
through an affiliate of the institution final regulations to incorporate the terms affiliate. The institution does not and subsidiary from the BHC Act and therefore. o Accept demand deposits or deposits that can be withdrawn the BHC Act s definition of control the agencies. by check or similar means for payment to third parties or indicated in the preamble that whether a banking. others or make commercial loans entity controls another entity under the BHC Act. o Obtain payment or payment related services from any may vary depending on the type of entity in. A company that controls an Federal Reserve bank question. 2 insured depository institution YES o Exercise Federal Reserve discount or borrowing The agencies indicated in the preamble that. e g a bank holding company privileges absent other facts and circumstances. establishing that a core banking entity or any of,its affiliates has control over a RIC BDC or. foreign public fund the RIC BDC or foreign public, NO fund will not be treated as a banking entity or an. affiliate of a banking entity for purposes of the, NO YES Volcker Rule if all of the following conditions are. A company that is treated as a satisfied, bank holding company for No core banking entity or any of its affiliates. purposes of Section 8 of the o Owns controls or holds with the power to. International Banking Act vote 25 or more of the voting shares or. Any foreign bank with a U S,appoints or has the power to appoint 25 or.
3 YES BANKING ENTITY NOT A BANKING ENTITY more of the directors trustees or other. branch U S agency U S managers of the RIC BDC or foreign public. commercial lending company fund or, or Edge Act subsidiary o Provides any investment advisory commodity. Any parent company of such trading advisory administrative or other. services to the RIC BDC or foreign public, foreign bank NO YES fund other than in compliance with any. limitations under applicable regulation order,or other authority and. NO The RIC BDC or foreign public fund is not itself. IS THE AFFILIATE OR SUBSIDIARY ANY OF THE FOLLOWING a core banking entity. A covered fund that is not itself a core banking Such a RIC BDC or foreign public fund would not. entity be subject to the prohibitions in the Volcker Rule. An affiliate or subsidiary as on proprietary trading or sponsoring or. A portfolio company held under the merchant, defined in the Bank Holding investing in or entering into a covered. 4 Company Act, YES banking or insurance company investment authorities.
of section 4 k of the BHC Act or any portfolio,transaction with a covered fund. of any of the above concern controlled by an SBIC that is not itself a. core banking entity,The FDIC acting in its corporate capacity or as. conservator or receiver CORE BANKING ENTITY,NO A core banking entity means a banking. entity as defined in boxes 1 2 or 3, 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com 2. HAT S A RGANIZED OR OCATED ANKING NTITY ENTITY,BANKING ENTITIES WITH A U S TOP TIER PARENT.
INCL ALL SUBSIDIARIES WORLDWIDE,U S TOP TIER,U S MADRID JAPAN. BANK BRANCH SUBSIDIARY,SUBSIDIARY, SEE WHAT IS A COVERED FUND AND FOREIGN PUBLIC FUND SLIDES 5 AND 13. 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com 3. HAT S A RGANIZED OR OCATED ANKING NTITY ENTITY,BANKING ENTITIES WITH A FOREIGN TOP TIER PARENT. INCL ALL SUBSIDIARIES WORLDWIDE,U S ORGANIZED OR LOCATED BANKING ENTITIES. INCL THEIR SUBSIDIARIES WORLDWIDE FOREIGN ORGANIZED OR LOCATED BANKING ENTITIES. EUROPEAN TOP TIER,U S U S U S,BANK SUBSIDIARY BRANCH.
BRAZIL SUBSIDIARY,SUBSIDIARY, SEE WHAT IS A COVERED FUND FOREIGN PUBLIC FUND AND OFFSHORE EXEMPTION SLIDES 5 13 AND 34. 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com 4. HAT S A OVERED UND FUND, An issuer that would be an investment company as defined in the Investment COVERED FUND. 3 C 1 OR 3 C 7 ISSUER, Company Act of 1940 but for sections 3 c 1 or 3 c 7 of that Act. An issuer that may rely on an exemption from the,definition of investment company under the 1940. Act other than sections 3 c 1 or 3 c 7 is not a,covered fund under this test.
NO SEE EXCLUDED PRIVATE FUND U S OR FOREIGN SLIDE 12 YES. A commodity pool that satisfies either of the following tests. Exempt Pool Test The commodity pool s registered CPO has claimed. IS THE ISSUER EXCLUDED,exempt pool status under CFTC Rule 4 7 a 1 iii. COVERED COMMODITY POOL YES FROM THE DEFINITION OF, Alternative Test The commodity pool has a registered CPO substantially all COVERED FUND. units in the pool are owned by qualified eligible persons QEPs and no units. in the pool have been publicly offered to persons other than QEPs. A fund organized or established outside the United States that offers or sells. interests inside the United States in reliance on section 3 c 1 or 3 c 7 of the. With respect to a U S Organized or Located Banking Entity only that. sponsors or owns an ownership interest in it a fund that fulfills all of the NOT A COVERED FUND. COVERED FOREIGN FUND following criteria, The fund is organized or established outside the United States. The ownership interests of the fund are offered and sold solely outside the. United States, The fund is or holds itself out as being an issuer or arrangement that raises. money from investors primarily for the purpose of investing in securities. for resale or other disposition or otherwise trading in securities. SEE WHAT IS A U S ORGANIZED OR LOCATED BANKING ENTITY SLIDES 3 AND 4. 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com 5. XCLUSIONS FROM THE EFINITION OF FUND,OVERED UND,RIC OR BDC.
3 C 1 OR 3 C 7 ISSUER PRIVATE FUND,FOREIGN PUBLIC,COVERED FUND. FOREIGN PENSION,WHOLLY OWNED,SUBSIDIARY,IS THE ISSUER EXCLUDED. ACQUISITION,COVERED COMMODITY POOL YES FROM THE DEFINITION OF. COVERED FUND,SECURITIZATION,ABCP CONDUIT,COVERED BOND. YES VEHICLE,NOT A COVERED FUND,SBIC OR PUBLIC,COVERED FOREIGN FUND INVESTMENT FUND.
COMPANY SEPARATE,BANK OWNED LIFE, 2014 Davis Polk Wardwell LLP All rights reserved This presentation is not a full analysis of the matters presented and should not be relied upon as legal advice volckerrule com 6. HAT S AN WNERSHIP NTEREST INTEREST,Other than a restricted profit. interest carried interest is,An equity or, the interest in the covered YES OWNERSHIP INTEREST. partnership interest,fund acquired or retained by,the banking entity. SEE EXCLUSION FOR RESTRICTED PROFIT INTEREST,CARRIED INTEREST SLIDE 8 NO YES.
An other similar NOT AN OWNERSHIP,interest INTEREST. DEBT SECURITIES AS POTENTIAL, SPECIFIED CHARACTERISTICS OF AN OTHER SIMILAR INTEREST OWNERSHIP INTERESTS. An other similar interest includes any interest in or security issued by a covered fund that exhibits any of the following The agencies indicate in the preamble. characteristics on a current future or contingent basis that an ownership interest does not. generally cover typical extensions of, Selection or removal of manager The right to participate in the selection or removal of a general partner managing credit the terms of which provide for. member member of the board of directors or trustees investment manager investment adviser or commodity trading payment of stated principal and interest. advisor of the covered fund excluding the rights of a creditor upon an event of default or acceleration calculated at a fixed rate or at a floating. limitations under applicable regulation order or other authority and The RIC BDC or foreign public fund is not itself a core banking entity Such a RIC BDC or foreign public fund would not be subject to the prohibitions in the Volcker Rule on proprietary trading or sponsoring or investing in or entering into a covered transaction with a covered fund CORE BANKING ENTITY A core

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