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Federal agencies issue interim final rule on CDOs

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Jan 15, 2014

Yesterday, the SEC and four other federal agencies (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Commodity Futures Trading Commission) jointly issued an interim final rule, "Treatment of Certain Collateralized Debt Obligations Backed Primarily by Trust Preferred Securities With Regard to Prohibitions and Restrictions on Certain Interests In, and Relationships With, Hedge Funds and Private Equity Funds."

The rule provides an exemption from Volcker Rule provisions for smaller banks, allowing these entities to retain an interest in collateralized debt obligations (CDOs) backed by trust preferred securities established before May 19, 2010, and obtained by December 10, 2013. It grandfathers CDOs that are tied primarily to securities issued by banks with less than $15 billion in assets.

The interim final rule is effective on April 1, 2014. Comments are due by March 3, 2014.

More information is available on the SEC's Web site:

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