(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 section 248.11 of this subpart, or that continues to hold an ownership
interest in accordance with section 248.11(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
sections 248.11, 248.12, or 248.13;
(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 section
248.11 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 Board (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 section 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 section 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 section 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) must comply with the limitations
in section 248.15.
(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 section 248.11
of this subpart, or that continues to hold an ownership interest in
accordance with section 248.11(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.
