New York partner Kay Gordon was quoted in an HFMweek article titled, “New Volcker carve out to stave off hedge fund redemptions wave.” The article explains that under Volcker Rule as originally adopted, any foreign investment bank with a US presence or an affiliate, would have needed to either redeem their current holding in a hedge fund or force the manager to spin out a new fund that would not commingle with US investors by 21 July.

However, a new FAQ jointly released by the CFTC, Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency and the SEC, has clarified that foreign entities do not now need to redeem. Instead, they are permitted to invest in many hedge funds, but they need to demonstrate the banking entity is not acting as a sub-adviser, manager or distributor.

“The FAQ effectively confirms that the US investors and the non-US banking entity investors can co-exist, potentially even within a single fund so long as the banking entities do not participate in marketing the fund,” Kay said.