"Implications of Dodd-Frank for Banks, Hedge Funds and Private Equity Funds"

On July 15, 2010, the U.S. Senate voted to approve the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Financial Bill).  President Obama is expected to sign the Financial Bill into law later this week.  The Financial Bill effects sweeping changes to the overall U.S. regulation of the financial services industry and attempts to prevent a future financial crises.  This Stroock Special Bulletin provides an overview of key provisions of the Financial Bill with implications for banks, hedge funds, and private equity funds. 

Among other things, the Financial Bill places new restrictions (known as the Volcker Rule) on banks, which limit (with a number of exceptions) the ability of a bank to trade its own capital and invest in hedge funds and private equity funds.  The Financial Bill also revises the accredited investor definition as it relates to natural persons to exclude the value of a person's primary residence from the $1 million net worth test.  This change is effective immediately upon the enactment of the Financial Bill, unlike many provisions of the Financial Bill that contain a transition period prior to effectiveness.