The Investment Funds Institute of Canada (IFIC) has added its voice to the Canadian chorus of concern over implementation of the so-called “Volcker Rule” in the U.S. under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
So far, that choir has included the five biggest banks, which made a joint submission, Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty.
Under the Volcker Rule, retail deposit-taking banks would not be allowed to engage in proprietary trading, unless it is directly related to market making and trading performed for customers. Banks would also be barred from owning or sponsoring hedge funds or private equity funds.
The IFIC letter contends that the rule would affect every Canadian investment fund manager that is affiliated with an American bank, and the Canadian mutual funds they manage.
“As drafted, the Volcker Rule erects a barrier between the Canadian mutual fund industry and its Canadian clients—especially among our retiree ‘snowbird’ population,” said Joanne De Laurentiis, president and CEO of IFIC. “The exemptions we are seeking would restore the longstanding U.S. regulatory practice of allowing Canadian mutual funds to deal with Canadians temporarily resident in the U.S.”
IFIC has recommended Canadian mutual funds be excluded from the proposed definition of “covered fund”; that U.S. registered investment companies, as well as Canadian and other foreign mutual funds, be excluded from the definition of “affiliate”; and that Canadians who are temporarily resident in the U.S. be excluded from the definition of “resident of the United States”.
The IFIC submission is available here.