§ 44.14. Limitations on relationships with a covered fund.
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/us/cfr/t12/s§ 44.14·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
(a)Relationships with a covered fund.
(1)Except as provided for in paragraph (a)(2) of this section, no banking entity that serves, directly or indirectly, as the investment manager, investment adviser, commodity trading advisor, or sponsor to a covered fund, that organizes and offers a covered fund pursuant to § 44.11 of this subpart, or that continues to hold an ownership interest in accordance with § 44.11(b) of this subpart, and no affiliate of such entity, may enter into a transaction with the covered fund, or with any other covered fund that is controlled by such covered fund, that would be a covered transaction as defined in section 23A of the Federal Reserve Act (12 U.S.C. 371c(b)(7)), as if such banking entity and the affiliate thereof were a member bank and the covered fund were an affiliate thereof.
(2)Notwithstanding paragraph (a)(1) of this section, a banking entity may:
(i)Acquire and retain any ownership interest in a covered fund in accordance with the requirements of § 44.11, § 44.12, or § 44.13;
(ii)Enter into any prime brokerage transaction with any covered fund in which a covered fund managed, sponsored, or advised by such banking entity (or an affiliate thereof) has taken an ownership interest, if:
(A)The banking entity is in compliance with each of the limitations set forth in § 44.11 of this subpart with respect to a covered fund organized and offered by such banking entity (or an affiliate thereof);
(B)The chief executive officer (or equivalent officer) of the banking entity certifies in writing annually no later than March 31 to the OCC (with a duty to update the certification if the information in the certification materially changes) that the banking entity does not, directly or indirectly, guarantee, assume, or otherwise insure the obligations or performance of the covered fund or of any covered fund in which such covered fund invests; and
(C)The Board has not determined that such transaction is inconsistent with the safe and sound operation and condition of the banking entity; and
(iii)Enter into a transaction with a covered fund that would be an exempt covered transaction under 12 U.S.C. 371c(d) or § 223.42 of the Board's Regulation W (12 CFR 223.42) subject to the limitations specified under 12 U.S.C. 371c(d) or § 223.42 of the Board's Regulation W (12 CFR 223.42), as applicable,
(iv)Enter into a riskless principal transaction with a covered fund; and
(v)Extend credit to or purchase assets from a covered fund, provided:
(A)Each extension of credit or purchase of assets is in the ordinary course of business in connection with payment transactions; settlement services; or futures, derivatives, and securities clearing;
(B)Each extension of credit is repaid, sold, or terminated by the end of five business days; and
(C)The banking entity making each extension of credit meets the requirements of § 223.42(l)(1)(i) and
(ii)of the Board's Regulation W (12 CFR 223.42(l)(1)(i) and(ii)), as if the extension of credit was an intraday extension of credit, regardless of the duration of the extension of credit.
(3)Any transaction or activity permitted under paragraphs (a)(2)(iii),
(iv)or
(v)of this section must comply with the limitations in § 44.15.
(b)Restrictions on transactions with covered funds. A banking entity that serves, directly or indirectly, as the investment manager, investment adviser, commodity trading advisor, or sponsor to a covered fund, or that organizes and offers a covered fund pursuant to § 44.11 of this subpart, or that continues to hold an ownership interest in accordance with § 44.11(b) of this subpart, shall be subject to section 23B of the Federal Reserve Act (12 U.S.C. 371c-1), as if such banking entity were a member bank and such covered fund were an affiliate thereof.
(c)Restrictions on other permitted transactions. Any transaction permitted under paragraphs (a)(2)(ii), (iii), or
(iv)of this section shall be subject to section 23B of the Federal Reserve Act (12 U.S.C. 371c-1) as if the counterparty were an affiliate of the banking entity under section 23B. [79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62101, Nov. 14, 2019; 85 FR 46502, July 31, 2020]
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§ 44.14
Limitations on relationships with a covered fund.
Fed. Reg.×1
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