13 February 2012

EFAMA comments on US proposals to implement Volcker rule

The European Fund and Asset Management Association (EFAMA) has published its response to the US financial regulatory authorities' consultation on draft implementing measures of the so‐called Volcker rule.

EFAMA recognises the challenges the US authorities face in implementing the Volcker Rule and the need to prevent banking entities in the United States from seeking to circumvent the requirements of the Volcker Rule by choosing to conduct otherwise prohibited activities outside the US. EFAMA believes, however, that in their current form, the proposed rules represent an inappropriate extraterritorial application of US jurisdiction, and significantly exacerbate the negative impact that the Volcker Rule will have on the European asset management industry, without measurably furthering the purpose or intent of the Volcker Rule.

EFAMA’s greatest concern with the proposed rules is the potentially disparate treatment of US mutual funds on the one hand, and UCITS and other regulated investment funds available to European investors on the other. US mutual funds are not considered to be ‘covered funds’ under the proposed rules, while their regulated European counterparts appear to be treated as such. No policy reason or justification for this unequal treatment of very similar investment products is offered in the proposed rules. As a result, EFAMA believes that this may simply be an unintended consequence of US authorities’ attempts to prevent banking entities from circumventing the Volcker Rule’s restrictions by moving their activities outside of the United States.

Commenting on the proposals, Peter De Proft, Director General of EFAMA, said: “Our members are deeply concerned about the extraterritorial impact of the Volcker rule on the structure of the European asset management industry. If these issues are not resolved, the rules would lead to extensive and expensive restructuring of an industry which has nothing to do with the aims of the Volcker Rule. It simply cannot be right that the Volcker Rule bites harder in Europe than in the US. EFAMA believes that these problems can be avoided, or at least substantially mitigated, without sacrificing the objectives of the Volcker Rule, through revisions to the proposed rules. We stand ready to work with the US authorities to make the proposals workable for European asset managers and their clients.”

Full comment letter

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