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Feds Adopt Volcker Rules Including CEO Compliance Certification

Five federal agencies including the SEC adopted final rules implementing the Volcker Rule limiting banks’ ability to engage in proprietary trading and invest in hedge and private equity funds.  The rules prohibit short-term proprietary trading in securities, derivatives, futures and options with exemptions for market making, hedging, and trading in government securities.  The rules require banks to implement detailed compliance programs depending on the size of the institution.  The largest banks (more than $50 Billion in assets) must implement detailed policies and procedures.  Additionally, the CEO must attest that the bank has put in place a compliance program reasonably designed to achieve compliance with the rules.  
OUR TAKE: The release is nearly 1000 pages long, so we recommend that a covered institution hire somebody to figure out what applies and how.  We think it is significant that the rules require CEO certification of the compliance program, an obligation analogous to CEO certification of financial statements required by Sarbanes-Oxley.  A similar requirement also applies to broker-dealer CEOs.  Given the pressure on investment adviser and fund CCOs, the SEC should consider imposing a similar requirement on adviser and fund CEOs.  How better to ensure a compliance “tone at the top”?

http://www.sec.gov/rules/final/2013/bhca-1.pdf

One comment

  1. Kevin Warmack says:

    When I saw the CEO Certification requirement, I automatically thought of the 3130 CEO Certification that applies to Broker-Dealers. The certification requires a constant relationship with your compliance officer as well as a firm understanding of the policies and procedures that are in place to ensure compliance with the applicable rules and regs. Given the environment today, I don’t think banks will have a problem with this requirement. The mindsets of a number of banks and their mnagement has changed over the years.

    Now if we could only get that same certification in place for investment advisors, etc.

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