The Volcker Rule is a proposed federal rule on proprietary trading that is mandated by Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
If approved, the rule would restrict an insured depository institution and its affiliates from engaging in proprietary trading; acquiring or retaining any equity, partnership, or other ownership interest in a hedge fund or private equity fund; and sponsoring a hedge fund or a private equity fund.
The draft Volcker Rule was published for comment in October 2011 by the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation and the U.S. Department of the Treasury Office of the Comptroller of the Currency.
The MSRB submitted a comment letter to regulators in January 2012 that urged expansion of the governmental obligations exemption to include all municipal securities. The letter argued that the draft Volcker Rule would exclude agencies of states and political subdivisions from the exemption, resulting in a “bifurcation” of the municipal securities market without benefiting the soundness of the banking system.