Clonado molecular en el sistema pGEM-T Easy Vector para la separación de alelos.

traditional hedge fund or private equity fund. In addition, the Agencies should incorporate the exemptions in Section 23A of the Federal Reserve Act and clarify that a banking entity may accept securities issued by a related covered fund as collateral security for a loan or extension of credit to any person or entity

As noted above, the Super 23A provisions of the statutory text of the Volcker Rule prohibit “covered transactions” between a parent banking entity and a related “hedge fund” or “private equity fund.”123 The Proposal, however, would prohibit covered transactions between a banking entity and any “covered fund” that a banking entity may permissibly sponsor—regardless of whether the covered fund is what is commonly understood to be a true hedge fund or a private equity fund.124 As noted above, the consequences of the overbroad application of Super 23A in the Proposal would be dire, particularly in the case of wholly owned subsidiaries.

123 _{See Bank Holding Company Act § 13(f).}

124 _{See Proposal § _.16(a) (prohibiting covered transactions between a banking entity and any covered fund a} banking entity sponsors, among other relationships).

59 Super 23A and Appropriate Exemptions

Bank of America agrees with other commenters that Congress included Super 23A in the Volcker Rule in order to prevent bailouts of investors in hedge funds and private equity funds. In light of this purpose, and the unintended harm that will occur if Super 23A is applied indiscriminately to all related covered funds, we join other commenters in asking that the Agencies exercise their discretion to, preferably, define “covered fund” to exclude wholly owned subsidiaries and other issuers that are not traditional “hedge funds” or “private equity funds,” or, in the alternative, to exercise their exemptive authority under subsection (d)(1)(J) to exempt wholly owned subsidiaries and other such issuers from Super 23A.

Bank of America also strongly agrees with other commenters that the Agencies have defined “covered transaction” unnecessarily broadly by reference only to the list of transactions in subsection (b)(7) of Section 23A,125 _{without incorporating the explicit} exemptions from Section 23A’s restrictions in subsection (d) of that statute,126 including extensions of credit fully secured by U.S. government or agency securities.127 _{This has the} effect, among others, of prohibiting the ordinary course extension of credit to related funds for clearing purposes. We believe that Congress could not have intended to define such transactions as “covered transactions” for purposes of Super 23A, even though they would not constitute “covered transactions” under Section 23A itself. There is no evidence in the statute or legislative history that Congress intended to effectively expand the definition of “covered transaction” in this manner for purposes of the Volcker Rule, nor is this reading of the statutory text required. We request that the Agencies incorporate the statutory exemptions into the definition of “covered transaction” for purposes of the Volcker Rule just as such exemptions are incorporated under Section 23A of the Federal Reserve Act.

Super 23A and Debtor-in-Possession Property

Bank of America joins other commenters in recommending that the Agencies clarify that a banking entity may accept securities issued by a related covered fund as collateral security for a loan or extension of credit to any person or entity. Failure to do so would create a conflict with the Proposal’s treatment of debtor-in-possession property (“DPC Property”) consisting of an ownership interest in a covered fund acquired as a consequence of a banking entity’s enforcement of its rights to seize and dispose of collateral pledged as security for an extension of credit on which the borrower has defaulted. The Agencies recognized that traditional lending activities would be disrupted if a banking entity could not foreclose on collateral in the form of securities of a covered fund, and expressly permitted banking entities, so long as they observe the long-standing banking Agency rules with respect to DPC Property, to foreclose on pledged collateral consisting of an ownership interest in a covered fund, and

125 _{See 12 U.S.C. § 371c(b)(7).} 126 _{See id. § 371c(d).}

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dispose of it.128 _{However, this exception conflicts with the definition of “covered transaction”} in Section 23A of the Federal Reserve Act, which is defined, in relevant part, as “the acceptance of securities or other debt obligations issued by [an] affiliate as collateral security for a loan or extension of credit to any person or company.”129 _{This conflict means that a} banking entity can foreclose on securities of a covered fund but may not accept such securities as collateral in the first place. We believe that it was not the Agencies’ intent to render the DPC Property exception illusory. In addition, given that the overbroad definition of “covered fund” appears to prohibit covered transactions with wholly owned subsidiaries and other issuers that are not traditional “hedge funds” or “private equity funds,” in the absence of the requested clarification, a banking entity would not be able to engage in the type of ordinary course lending transactions with affiliates that are critical to safety and soundness.

Acceptance of related covered funds as collateral should be permitted by Super 23A, so long as there is no related extension of credit

Further, at a minimum, to avoid unnecessary burden and expense not needed to foster the goals of Super 23A, the Agencies should clarify that Super 23A does not prohibit a banking entity from accepting affiliated covered funds as collateral for an extension of credit, so long as the banking entity does not, in fact, extend credit based on collateral consisting of affiliated covered funds. It is customary for borrowing clients to hold their covered funds in a single securities account, together with their other investments, and pledge the entire account to a banking entity as collateral. The amount of credit made available by the banking entity is a function of the value of the securities held as collateral and applicable regulations limiting such “margin” lending (the so-called “borrowing base”). Super 23A, however, as written would prohibit a banking entity from accepting affiliated covered funds as collateral even if no extension of credit were made in respect of the pledged affiliated covered funds (e.g., the covered funds would not be excluded from the borrowing base). Without the requested clarification, Super 23A would require a significant restructuring of customer accounts: customers would have to establish a new and separate unencumbered account into which the related covered funds would be transferred in order to avoid “pledging” affiliated covered funds in violation of Super 23A. Bank of America believes an alternative and less burdensome and costly approach would be to clarify that it would not be a violation of Super 23A to accept related covered funds as collateral, so long as the banking entity did not, in fact, extend credit against such pledged related covered funds.

Recommendations

Bank of America recommends that the Agencies:

 apply Super 23A only to those funds commonly understood to be hedge funds and private equity funds;

128 _{See Proposal § _.14(b)(i).} 129 _{See 12 U.S.C. § 371c(b)(7)(D).}

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 incorporate the statutory exemptions in Section 23A of the Federal Reserve Act into the definition of “covered transaction” under Super 23A; and

 clarify that a banking entity may accept securities issued by a related covered fund as collateral security for a loan or extension of credit to any person or entity in order to be consistent with the treatment of debtor-in-possession property adopted by the Agencies under the Proposal or, at a minimum, clarify that it will not be a violation of Super 23A for a banking entity to accept a related covered fund as collateral so long as the banking entity does not, in fact, extend credit on the basis of such collateral.

III. The Agencies must carefully weigh the costs and benefits of the Proposal and