New Volcker Rule Interpretation Clarifies that Foreign Banks Are Permitted to Invest in Third-Party Funds with U.S. Investors

On February 27, 2015, the regulatory agencies responsible for implementing the Volcker Rule released an FAQ regarding the interpretation of the Volcker Rule’s exemption permitting foreign banking organizations to invest in and sponsor covered funds “solely outside of the United States” (the “SOTUS Exemption”). The FAQ confirms that the restriction in the SOTUS Exemption on offers and sales to residents of the United States applies only to marketing and sales activities undertaken by the foreign banking entity seeking to rely on the SOTUS Exemption, and not to third-party funds or fund sponsors. As a result, the FAQ confirms that foreign banks should be able to rely on the SOTUS Exemption to invest in third-party funds without regard to whether those funds sell interests to U.S. investors, provided the other requirements of the SOTUS Exemption are met.