FRVV_20201216_omb

Supporting Statement for the
Reporting, Recordkeeping, and Disclosure Requirements Associated with Regulation VV
(FR VV; OMB No. 7100-0360)
Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and
Relationships with, Hedge Funds and Private Equity Funds
(Docket No. R-1694) (RIN 7100-AF70)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended for three years, with
revision, the Reporting, Recordkeeping, and Disclosure Requirements Associated with
Regulation VV (FR VV; OMB No. 7100-0360). The Board, Office of the Comptroller of the
Currency (OCC), Federal Deposit Insurance Corporation (FDIC), Commodity Futures Trading
Commission (CFTC), and Securities and Exchange Commission (SEC) (collectively, the
agencies) adopted a final rule that implemented section 13 of the Bank Holding Company Act of
1956 (BHC Act), which was added by section 619 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act). Section 13 contains certain prohibitions and
restrictions on the ability of a banking entity supervised by the agencies to engage in proprietary
trading or to have certain interests in, or relationships with, a hedge fund or private equity fund.
Section 248.20 and Appendix A of Regulation VV - Proprietary Trading and Certain Interests in
and Relationships with Covered Funds (12 CFR Part 248) require certain of the largest banking
entities engaged in significant trading activities to collect, evaluate, and furnish data regarding
covered trading activities as an indicator of areas meriting additional attention by the banking
entity and the Board.
The Board takes burden for all institutions under a holding company including OCCsupervised institutions, FDIC-supervised institutions, banking entities for which the CFTC is the
primary financial regulatory agency, and banking entities for which the SEC is the primary
financial regulatory agency. The OCC and FDIC submit similar requests for OMB review for
institutions not under a holding company.
The agencies adopted amendments to the regulations implementing section 13 of the
BHC Act. Section 13 contains certain restrictions on the ability of a banking entity or nonbank
financial company supervised by the Board to engage in proprietary trading and have certain
interests in, or relationships with, a hedge fund or private equity fund (covered funds). These
final amendments are intended to improve and streamline the regulations implementing
section 13 of the BHC Act by modifying and clarifying requirements related to the covered fund
provisions of the rules. The new recordkeeping requirements are found in section
248.10(c)(18)(ii)(B)(1) and the modified disclosure requirements are found in section
248.11(a)(8)(i). The final rule is effective on October 1, 2020.
The current estimated total annual burden for the FR VV is 28,232 hours, and would
increase to 36,112 hours. The revisions would result in an increase of 7,880 hours. The FR VV-1

form and instructions are available on the Board’s public website at
https://www.federalreserve.gov/apps/reportforms/default.aspx.
Background and Justification
Section 619 of the Dodd-Frank Act added a new section 13 to the BHC Act (12 U.S.C.
§ 1851) that generally prohibits any banking entity from engaging in proprietary trading or from
acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a
hedge fund or private equity fund (covered fund), subject to certain exemptions. This section also
provides that a nonbank financial company designated by the Financial Stability Oversight
Council for supervision by the Board is subject to additional capital requirements, quantitative
limits, or other restrictions if the company engages in certain proprietary trading or covered fund
activities.
Section 13 of the BHC Act generally prohibits banking entities from engaging as
principal in proprietary trading for the purpose of selling financial instruments in the near term or
otherwise with the intent to resell in order to profit from short-term price movements. Section
13(d)(1) expressly exempts from this prohibition, subject to conditions, certain activities,
including (1) trading in U.S. government, agency, state, and municipal obligations,
(2) underwriting and market making-related activities, (3) risk-mitigating hedging activities,
(4) trading on behalf of customers, (5) trading for the general account of insurance companies,
and (6) foreign trading by non-U.S. banking entities.
Section 13 of the BHC Act also generally prohibits banking entities from acquiring or
retaining an ownership interest in, or sponsoring, a covered fund. Section 13 contains several
exemptions that permit banking entities to make limited investments in covered funds, subject to
a number of restrictions designed to ensure that banking entities do not rescue investors in these
funds from loss and are not themselves exposed to significant losses from investments or other
relationships with these funds.
Section 13 of the BHC Act does not prohibit a nonbank financial company supervised by
the Board from engaging in proprietary trading, or from having the types of ownership interests
in or relationships with a covered fund that a banking entity is prohibited or restricted from
having under section 13 of the BHC Act. However, section 13 of the BHC Act provides that
these activities be subject to additional capital charges, quantitative limits, or other restrictions.
The agencies believe that the reporting, recordkeeping, and disclosure requirements
associated with the rule facilitate the ability of banking entities and the agencies to enforce
compliance with section 13 of the BHC Act and the final rule and to identify, monitor, and limit
risks of activities permitted under section 13, particularly involving banking entities posing the
greatest risk to financial stability. No other federal law mandates these reporting, recordkeeping,
and disclosure requirements.

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Description of Information Collection
The reporting requirements within Regulation VV are found in sections 248.4(c)(3)(i),
248.12(e), 248.20(d), and 248.20(i); recordkeeping requirements are found in sections
248.3(d)(3), 248.4(b)(3)(i)(A), 248.4(c)(3)(i), 248.5(c), 248.11(a)(2), and 248.20(b)-(f); and
disclosure requirements are found in section 248.11(a)(8)(i). The recordkeeping burden for
sections 248.4(a)(2)(iii), 248.4(b)(2)(iii), 248.5(b)(1), 248.5(b)(2)(i), 248.5(b)(2)(iv),
248.13(a)(2)(i), and 248.13(a)(2)(ii)(A) is accounted for in section 248.20(b); recordkeeping
burden for Appendix B is accounted for in section 248.20(c); reporting and recordkeeping
burden for Appendix A is accounted for in section 248.20(d); and recordkeeping burden for
sections 248.10(c)(12)(i) and 248.10(c)(12)(iii) is accounted for in section 248.20(e). These
information collection requirements for the Board implemented section 13 of the BHC Act for
banking entities for which the Board is authorized to issue regulations under section 13(b)(2) of
the BHC Act and take actions under section 13(e) of that Act. These banking entities include any
state bank that is a member of the Federal Reserve System, any company that controls an insured
depository institution (including a bank holding company and savings and loan holding
company), any company that is treated as a bank holding company for purposes of section 8 of
the International Banking Act of 1978, and any subsidiary of the foregoing other than a
subsidiary for which the OCC, FDIC, CFTC, or SEC is the primary financial regulatory agency.
The Board takes burden for all institutions under a holding company including OCC-supervised
institutions, FDIC-supervised institutions, banking entities for which the CFTC is the primary
financial regulatory agency, and banking entities for which the SEC is the primary financial
regulatory agency. Compliance with the information collection is required for entities subject to
Regulation VV to obtain the benefit of engaging in certain types of proprietary trading or
investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund.
No other federal law mandates these reporting, recordkeeping, and disclosure requirements.
Reporting Requirements
Section 248.4(c)(3)(i) requires a banking entity to make available to the agency upon
request records regarding (1) any limit that is exceeded and (2) any temporary or permanent
increase to any limit(s), in each case in the form and manner as directed by the primary financial
regulatory agency.
Section 248.12(e) states that, upon application by a banking entity, the Board may extend
the period of time to meet the requirements on ownership limitations in Regulation VV for up to
two additional years, if the Board finds that an extension would be consistent with safety and
soundness and not detrimental to the public interest. An application for extension must (1) be
submitted to the Board at least 90 days prior to expiration of the applicable time period,
(2) provide the reasons for application including information that addresses the factors in
paragraph (e)(2) of section 248.12, and (3) explain the banking entity’s plan for reducing the
permitted investment in a covered fund through redemption, sale, dilution, or other methods.
The Board’s Regulation VV Quantitative Measurements (FR VV-1) reporting form
standardizes the reporting requirements in section 248.20(d). Section 248.20(d) provides that a
banking entity engaged in proprietary trading activity must comply with the reporting

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requirements described in Appendix A, if (1) the banking entity has, together with its affiliates
and subsidiaries, trading assets and liabilities (excluding trading assets and liabilities involving
obligations of or guaranteed by the United States or any agency of the United States) the average
gross sum of which over the previous consecutive four quarters, as measured as of the last day of
each of the four prior calendar quarters, equals or exceeds an established threshold, (2) in the
case of a foreign banking entity, the average gross sum of the trading assets and liabilities of the
combined U.S. operations of the foreign banking entity (including all subsidiaries, affiliates,
branches and agencies of the foreign banking entity operating, located or organized in the United
States and excluding trading assets and liabilities involving obligations of or guaranteed by the
United States or any agency of the United States) over the previous consecutive four quarters, as
measured as of the last day of each of the four prior calendar quarters, equals or exceeds the
established threshold, or (3) the Board notifies the banking entity in writing that it must satisfy
the reporting requirements contained in Appendix A. The threshold for reporting is $50 billion
beginning on June 30, 2014; $25 billion beginning on April 30, 2016; and $10 billion beginning
on December 31, 2016. In the November 14, 2019, final rule, the threshold for reporting was
modified from $10 billion or more in trading assets and liabilities to $20 billion or more in
trading assets and liabilities for the January 1, 2021, compliance date. Unless the appropriate
agency notifies the banking entity in writing that it must report on a different basis, a banking
entity with $50 billion or more in trading assets and liabilities must report the information
required by Appendix A for each calendar month within 30 days of the end of the relevant
calendar month. Beginning with information for the month of January 2015, such information
must be reported within 10 days of the end of that calendar month. Any other banking entity
subject to Appendix A must report the information required by Appendix A for each calendar
quarter within 30 days of the end of that calendar quarter unless the appropriate agency notifies
the banking entity in writing that it must report on a different basis. Appendix A requires
banking entities to furnish the following quantitative measurements for each trading desk of the
banking entity: (1) risk and position limits and usage, (2) risk factor sensitivities, (3) Value-atRisk and stress Value-at-Risk, (4) comprehensive profit and loss attribution, (5) inventory
turnover, (6) inventory aging, and (7) customer facing trade ratio.
Risk and position limits are the constraints that define the amount of risk that a trading
desk is permitted to take at a point in time, as defined by the banking entity for a specific trading
desk. Usage represents the portion of the trading desk’s limits that are accounted for by the
current activity of the desk. Risk and position limits must be reported in the format used by the
banking entity for the purposes of risk management of each trading desk. Risk and position limits
are often expressed in terms of risk measures, such as Value-at-Risk (VaR) and risk factor
sensitivities, but may also be expressed in terms of other observable criteria, such as net open
positions. When criteria other than VaR or risk factor sensitivities are used to define the risk and
position limits, both the value of the risk and position limits and the value of the variables used
to assess whether these limits have been reached must be reported. The calculation period is one
trading day and the measurement frequency is daily.
Risk factor sensitivities are changes in a trading desk’s comprehensive profit and loss that
are expected to occur in the event of a change in one or more underlying variables that are
significant sources of the trading desk’s profitability and risk. A banking entity must report the
risk factor sensitivities that are monitored and managed as part of the trading desk’s overall risk

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management policy. The underlying data and methods used to compute a trading desk’s risk
factor sensitivities will depend on the specific function of the trading desk and the internal risk
management models employed. The number and type of risk factor sensitivities that are
monitored and managed by a trading desk, and furnished to the appropriate agency, will depend
on the explicit risks assumed by the trading desk. In general, however, reported risk factor
sensitivities must be sufficiently granular to account for a preponderance of the expected price
variation in the trading desk’s holdings. Trading desks must take into account any relevant
factors in calculating risk factor sensitivities, including, for example, the following with respect
to particular asset classes: commodity derivative positions, credit positions, credit-related
derivative positions, equity derivative positions, equity positions, foreign exchange derivative
positions, and interest rate positions, including interest rate derivative positions. The methods
used by a banking entity to calculate sensitivities to a common factor shared by multiple trading
desks, such as an equity price factor, must be applied consistently across its trading desks so that
the sensitivities can be compared from one trading desk to another. The calculation period is one
trading day and the measurement frequency is daily.
VaR is the commonly used percentile measurement of the risk of future financial loss in
the value of a given set of aggregated positions over a specified period of time, based on current
market conditions. Stress VaR is the percentile measurement of the risk of future financial loss in
the value of a given set of aggregated positions over a specified period of time, based on market
conditions during a period of significant financial stress. Banking entities must compute and
report VaR and stress VaR by employing generally accepted standards and methods of
calculation. VaR should reflect a loss in a trading desk that is expected to be exceeded less than
one percent of the time over a one-day period. For those banking entities that are subject to
regulatory capital requirements imposed by a Federal banking agency, VaR and stress VaR must
be computed and reported in a manner that is consistent with such regulatory capital
requirements. In cases where a trading desk does not have a standalone VaR or stress VaR
calculation but is part of a larger aggregation of positions for which a VaR or stress VaR
calculation is performed, a VaR or stress VaR calculation that includes only the trading desk’s
holdings must be performed consistent with the VaR or stress VaR model and methodology used
for the larger aggregation of positions. The calculation period is one trading day and the
measurement frequency is daily.
Comprehensive profit and loss attribution is an analysis that attributes the daily
fluctuation in the value of a trading desk’s positions to various sources. First, the daily profit and
loss of the aggregated positions is divided into three categories: (1) profit and loss attributable to
a trading desk’s existing positions that were also positions held by the trading desk as of the end
of the prior day (existing positions), (2) profit and loss attributable to new positions resulting
from the current day’s trading activity (new positions), and (3) residual profit and loss that
cannot be specifically attributed to existing positions or new positions. The sum of (1), (2), and
(3) must equal the trading desk’s comprehensive profit and loss at each point in time. In addition,
profit and loss measurements must calculate volatility of comprehensive profit and loss (i.e., the
standard deviation of the trading desk’s one-day profit and loss, in dollar terms) for the reporting
period for at least a 30-, 60-, and 90-day lag period, from the end of the reporting period, and any
other period that the banking entity deems necessary to meet the requirements of the rule. The
specific categories used by a trading desk in the comprehensive profit and loss attribution

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analysis and amount of detail for the analysis should be tailored to the type and amount of
trading activities undertaken by the trading desk. The new position attribution must be computed
by calculating the difference between the prices at which instruments were bought and/or sold
and the prices at which those instruments are marked to market at the close of business on that
day multiplied by the notional or principal amount of each purchase or sale. Any fees,
commissions, or other payments received (paid) that are associated with transactions executed on
that day must be added (subtracted) from such difference. These factors must be measured
consistently over time to facilitate historical comparisons. The calculation period is one trading
day and the measurement frequency is daily.
Inventory turnover is a ratio that measures the turnover of a trading desk’s inventory. The
numerator of the ratio is the absolute value of all transactions over the reporting period. The
denominator of the ratio is the value of the trading desk’s inventory at the beginning of the
reporting period. For derivatives other than options and interest rate derivatives, value means
gross notional value. For options, value means delta adjusted notional value. For interest rate
derivatives, value means 10-year bond equivalent value. The calculation period is 30 days, 60
days, and 90 days and the measurement frequency is daily.
Inventory aging generally describes a schedule of the trading desk’s aggregate assets and
liabilities and the amount of time that those assets and liabilities have been held. Inventory aging
should measure the age profile of the trading desk’s assets and liabilities. In general, inventory
aging must be computed using a trading desk’s trading activity data and must identify the value
of a trading desk’s aggregate assets and liabilities. Inventory aging must include two schedules,
an asset-aging schedule and a liability-aging schedule. Each schedule must record the value of
assets or liabilities held over all holding periods. For derivatives other than options and interest
rate derivatives, value means gross notional value. For options, value means delta adjusted
notional value. For interest rate derivatives, value means 10-year bond equivalent value. The
calculation period is one trading day and the measurement frequency is daily.
The customer-facing trade ratio is a ratio comparing the transactions involving a
counterparty that is a customer of the trading desk to the transactions involving a counterparty
that is not a customer of the trading desk. A trade count based ratio must be computed that
records the number of transactions involving a counterparty that is a customer of the trading desk
and the number of transactions involving a counterparty that is not a customer of the trading
desk. A value based ratio must be computed that records the value of transactions involving a
counterparty that is a customer of the trading desk and the value of transactions involving a
counterparty that is not a customer of the trading desk. For purposes of calculating the customerfacing trade ratio, a counterparty is considered to be a customer of the trading desk if the
counterparty is a market participant that makes use of the banking entity’s market making-related
services by obtaining such services, responding to quotations, or entering into a continuing
relationship with respect to such services. However, a trading desk or other organizational unit of
another banking entity would not be a client, customer, or counterparty of the trading desk if the
other entity has trading assets and liabilities of $50 billion or more as measured in accordance
with section 248.20(d)(1) unless the trading desk documents how and why a particular trading
desk or other organizational unit of the entity should be treated as a client, customer, or
counterparty of the trading desk. Transactions conducted anonymously on an exchange or similar

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trading facility that permits trading on behalf of a broad range of market participants would be
considered transactions with customers of the trading desk. For derivatives other than options
and interest rate derivatives, value means gross notional value. For options, value means delta
adjusted notional value. For interest rate derivatives, value means 10-year bond equivalent value.
The calculation period is 30 days, 60 days, and 90 days and the measurement frequency is daily.
Sections 248.3(b)(4), 248.4(c)(4), 248.20(g)(2), and 248.20(h) would implicate the notice
and response procedures pursuant to section 248.20(i) that an agency would follow when
rebutting a presumption or exercising a reservation of authority.
Recordkeeping Requirements
Section 248.3(d)(3) specifies that proprietary trading does not include any purchase or
sale of a security by a banking entity for the purpose of liquidity management in accordance with
a documented liquidity management plan of the banking entity that (1) specifically contemplates
and authorizes the particular securities to be used for liquidity management purposes, the
amount, types, and risks of these securities that are consistent with liquidity management, and
the liquidity circumstances in which the particular securities may or must be used, (2) requires
that any purchase or sale of securities contemplated and authorized by the plan be principally for
the purpose of managing the liquidity of the banking entity, and not for the purpose of short-term
resale, benefitting from actual or expected short-term price movements, realizing short-term
arbitrage profits, or hedging a position taken for such short-term purposes, (3) requires that any
securities purchased or sold for liquidity management purposes be highly liquid and limited to
securities the market, credit and other risks of which the banking entity does not reasonably
expect to give rise to appreciable profits or losses as a result of short-term price movements,
(4) limits any securities purchased or sold for liquidity management purposes, together with any
other instruments purchased or sold for such purposes, to an amount that is consistent with the
banking entity’s near-term funding needs, including deviations from normal operations of the
banking entity or any affiliate thereof, as estimated and documented pursuant to methods
specified in the plan, (5) includes written policies and procedures, internal controls, analysis and
independent testing to ensure that the purchase and sale of securities that are not permitted under
section 248.6(a) or (b) are for the purpose of liquidity management and in accordance with the
liquidity management plan described in this paragraph, and (6) is consistent with the appropriate
agency’s supervisory requirements, guidance, and expectations regarding liquidity management.
Section 248.4(b)(3)(i)(A) provides that a trading desk or other organizational unit of
another banking entity with more than $50 billion in trading assets and liabilities is not a client,
customer, or counterparty unless the trading desk documents how and why a particular trading
desk or other organizational unit of the entity should be treated as a client, customer, or
counterparty of the trading desk for purposes of section 248.4(b).
Section 248.4(c)(3)(i) requires a banking entity to maintain records regarding (1) any
limit that is exceeded and (2) any temporary or permanent increase to any limit(s), in each case
in the form and manner as directed by the primary financial regulatory agency.

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Section 248.5(c) requires documentation for certain purchases or sales of a financial
instrument for risk-mitigating hedging purposes that is (1) not established by the specific trading
desk establishing the underlying positions, contracts, or other holdings the risks of which the
hedging activity is designed to reduce, (2) established by the specific trading desk establishing or
responsible for the underlying positions, contracts, or other holdings but that is not specifically
identified in the trading desk’s written policies and procedures, or (3) established to hedge
aggregated positions across two or more trading desks. In connection with any purchase or sale
that meets these specified circumstances, a banking entity must, at a minimum and
contemporaneously with the purchase or sale, document (1) the specific, identifiable risk(s) of
the identified positions, contracts, or other holdings of the banking entity that the purchase or
sale is designed to reduce, (2) the specific risk-mitigating strategy that the purchase or sale is
designed to fulfill, and (3) the trading desk or other business unit that is establishing and
responsible for the hedge. The banking entity must also create and retain records sufficient to
demonstrate compliance with this section for at least five years in a form that allows the banking
entity to promptly produce such records to the appropriate agency on request, or such longer
period as required under other law or this part.
Section 248.11(a)(2) requires that a banking entity must create a written plan or similar
documentation in order to acquire or retain an ownership interest in a covered fund that is
organized and offered by the banking entity pursuant to that exemption. The covered fund must
be organized and offered only in connection with the provision of bona fide trust, fiduciary,
investment advisory, or commodity trading advisory services and only to persons that are
customers of such services of the banking entity. The written plan or similar documentation must
outline how the banking entity intends to provide advisory or other similar services to its
customers through organizing and offering the covered fund.
Section 248.20(a) requires each banking entity to develop a compliance program
reasonably designed to ensure and monitor compliance with the prohibitions and restrictions on
proprietary trading and covered fund activities and investments set forth in section 13 of the
BHC Act. For a banking entity with total consolidated assets over $10 billion, the compliance
program from section 248.20(b) must include (1) written policies and procedures reasonably
designed to document, describe, monitor and limit trading activities, including setting and
monitoring required limits set out in sections 248.4 and 248.5 and activities and investments with
respect to a covered fund (including those permitted under sections 248.3 through 248.6 and
sections 248.11 through 248.14) to ensure that all activities and investments conducted by the
banking entity that are subject to section 13 of the BHC Act and subpart D of Regulation VV
comply with section 13 of the BHC Act and applicable regulations, (2) a system of internal
controls reasonably designed to monitor compliance with section 13 of the BHC Act and
subpart D of Regulation VV and to prevent the occurrence of activities or investments that are
prohibited by section 13 of the BHC Act and applicable regulations, (3) a management
framework that clearly delineates responsibility and accountability for compliance with section
13 of the BHC Act and subpart D of Regulation VV and includes appropriate management
review of trading limits, strategies, hedging activities, investments, incentive compensation, and
other matters identified in this part or by management as requiring attention, (4) independent
testing and audit of the effectiveness of the compliance program conducted periodically by
qualified personnel of the banking entity or by a qualified outside party, (5) training for trading

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personnel and managers, as well as other appropriate personnel, to effectively implement and
enforce the compliance program, and (6) records sufficient to demonstrate compliance with
section 13 of the BHC Act and applicable regulations, which a banking entity must promptly
provide to the Board upon request and retain for a period of no less than five years or such longer
period as required by the Board.
Section 248.20(c) specifies that the compliance program of a banking entity must satisfy
the requirements and other standards contained in Appendix B, if (1) the banking entity engages
in proprietary trading permitted under subpart B and is required to comply with the reporting
requirements of section 248.20(d), (2) the banking entity has reported total consolidated assets as
of the previous calendar year end of $50 billion or more or, in the case of a foreign banking
entity, has total U.S. assets as of the previous calendar year end of $50 billion or more (including
all subsidiaries, affiliates, branches and agencies of the foreign banking entity operating, located
or organized in the United States), or (3) the Board notifies the banking entity in writing that it
must satisfy the requirements and other standards contained in Appendix B. Appendix B
provides enhanced minimum standards for compliance programs for banking entities that meet
the thresholds in section 248.20(c) as described above. These include the establishment,
maintenance, and enforcement of the enhanced compliance program and meeting the minimum
written policies and procedures, internal controls, management framework, independent testing,
training, and recordkeeping. The program must (1) be reasonably designed to identify, document,
monitor, and report the permitted trading and covered fund activities and investments; identify,
monitor, and promptly address the risk of these covered activities and investments and potential
areas of noncompliance; and prevent activities or investments prohibited by, or that do not
comply with, section 13 of the BHC Act and this part, (2) establish and enforce appropriate
limits on covered activities and investments, including limits on size, scope, complexity, and
risks of individual activities or investments consistent with the requirements of section 13 of the
BHC Act and this part, (3) subject the effectiveness of the compliance program to periodic
independent review and testing, and ensure that internal audit, corporate compliance, and internal
control functions involved in review and testing are effective and independent, (4) make senior
management and others accountable for effective implementation of compliance program and
ensure that board of directors and chief executive officer (or equivalent) of the banking entity
review effectiveness of the compliance program, and (5) facilitate supervision and examination
by the relevant agencies of permitted trading and covered fund activities and investments.
Section 248.20(d) provides that certain banking entities engaged in certain proprietary
trading activities must comply with the reporting requirements described in Appendix A. A
banking entity subject to these requirements must also, for any quantitative measurement
furnished to the appropriate agency pursuant to section 248.20(d) and Appendix A, create and
maintain records documenting the preparation and content of these reports, as well as such
information as is necessary to permit the appropriate agency to verify the accuracy of such
reports, for a period of five years from the end of the calendar year for which the measurement
was taken.
Section 248.20(e) specifies additional recordkeeping requirements for covered funds.
Any banking entity that has more than $10 billion in total consolidated assets as reported on
December 31 of the previous two calendar years must maintain records that include

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(1) documentation of the exclusions or exemptions other than sections 3(c)(1) and 3(c)(7) of the
Investment Company Act of 1940 relied on by each fund sponsored by the banking entity
(including all subsidiaries and affiliates) in determining that such fund is not a covered fund,
(2) for each fund sponsored by the banking entity (including all subsidiaries and affiliates) for
which the banking entity relies on one or more of the exclusions from the definition of covered
fund provided by sections 248.10(c)(1), 248.10(c)(5), 248.10(c)(8), 248.10(c)(9), or
248.10(c)(10) of subpart C of the final rule, documentation supporting the banking entity’s
determination that the fund is not a covered fund pursuant to one or more of those exclusions,
(3) for each seeding vehicle described in sections 248.10(c)(12)(i) or 248.10(c)(12)(iii) of
subpart C that will become a registered investment company or SEC-regulated business
development company, a written plan documenting the banking entity’s determination that the
seeding vehicle will become a registered investment company or SEC-regulated business
development company, the period of time during which the vehicle will operate as a seeding
vehicle, and the banking entity’s plan to market the vehicle to third-party investors and convert it
into a registered investment company or SEC-regulated business development company within
the time period specified in section 248.12(a)(2)(i)(B) of subpart C, and (4) for any banking
entity that is, or is controlled directly or indirectly by a banking entity that is, located in or
organized under the laws of the United States or of any State, if the aggregate amount of
ownership interests in foreign public funds that are described in section 248.10(c)(1) of
subpart C owned by such banking entity (including ownership interests owned by any affiliate
that is controlled directly or indirectly by a banking entity that is located in or organized under
the laws of the United States or of any State) exceeds $50 million at the end of two or more
consecutive calendar quarters, beginning with the next succeeding calendar quarter,
documentation of the value of the ownership interests owned by the banking entity (and such
affiliates) in each foreign public fund and each jurisdiction in which any such foreign public fund
is organized, calculated as of the end of each calendar quarter, which documentation must
continue until the banking entity’s aggregate amount of ownership interests in foreign public
funds is below $50 million for two consecutive calendar quarters.
Pursuant to section 248.20(f)(1), a banking entity that does not engage in activities or
investments pursuant to subpart B or subpart C (other than trading activities permitted pursuant
to section 248.6(a) of subpart B) may satisfy the requirements of section 248.20 by establishing
the required compliance program prior to becoming engaged in such activities or making such
investments (other than trading activities permitted pursuant to section 248.6(a) of subpart B).
Pursuant to section 248.20(f)(2), a banking entity with total consolidated assets of $10
billion or less as reported on December 31 of the previous two calendar years that engages in
activities or investments pursuant to subpart B or subpart C (other than trading activities
permitted under section 248.6(a)) may satisfy the requirements of section 248.20 by including in
its existing compliance policies and procedures appropriate references to the requirements of
section 13 and this part and adjustments as appropriate given the activities, size, scope, and
complexity of the banking entity.

10

Disclosure Requirements
Section 248.11(a)(8)(i) requires that a banking entity must clearly and conspicuously
disclose, in writing, to any prospective and actual investor in the covered fund (such as through
disclosure in the covered fund’s offering documents) (1) that “any losses in [such covered fund]
will be borne solely by investors in [the covered fund] and not by [the banking entity]; therefore,
[the banking entity’s] losses in [such covered fund] will be limited to losses attributable to the
ownership interests in the covered fund held by [the banking entity] in its capacity as investor in
the [covered fund] or as beneficiary of a carried interest held by [the banking entity]”, (2) that
such investor should read the fund offering documents before investing in the covered fund,
(3) that the “ownership interests in the covered fund are not insured by the FDIC, and are not
deposits, obligations of, or endorsed or guaranteed in any way, by any banking entity” (unless
that happens to be the case), and (4) the role of the banking entity and its affiliates and
employees in sponsoring or providing any services to the covered fund.
Respondent Panel
The FR VV panel comprises state member banks, bank holding companies, savings and
loan holding companies, foreign banking organizations, U.S. State branches or agencies of
foreign banks, and other holding companies that control an insured depository institution and any
subsidiary of the foregoing other than a subsidiary for which the OCC, FDIC, CFTC, or SEC is
the primary financial regulatory agency. The Board will take burden for all institutions under a
holding company including OCC-supervised institutions, FDIC-supervised institutions, banking
entities for which the CFTC is the primary financial regulatory agency, as defined in section
2(12)(C) of the Dodd-Frank Act, and banking entities for which the SEC is the primary financial
regulatory agency, as defined in section 2(12)(B) of the Dodd-Frank Act.
Revisions to the FR VV
The agencies adopted amendments to the regulations implementing section 13 of the
BHC Act. Section 13 contains certain restrictions on the ability of a banking entity or nonbank
financial company supervised by the Board to engage in proprietary trading and have certain
interests in, or relationships with, a hedge fund or private equity fund (covered funds). These
final amendments are intended to improve and streamline the regulations implementing
section 13 of the BHC Act by modifying and clarifying requirements related to the covered fund
provisions of the rules. The new recordkeeping requirements are found in section
248.10(c)(18)(ii)(B)(1) and the modified disclosure requirements are found in section
248.11(a)(8)(i). The final rule is effective on October 1, 2020.
Recordkeeping Requirements
Section 248.10(c)(18)(ii)(B)(1) requires a banking entity relying on the exclusion from
the covered fund definition for customer facilitation vehicles to maintain documentation
outlining how the banking entity intends to facilitate the customer’s exposure to a transaction,
investment strategy, or service.

11

Disclosure Requirements
Section 248.11(a)(8)(i), which requires banking entities that organize and offer covered
funds to make certain disclosures to investors in such funds, was expanded to also apply to
banking entities sponsoring credit funds, venture capital funds, family wealth management
vehicles, or customer facilitation vehicles, in reliance on the exclusions for such funds.
Time Schedule for Information Collection
The information collection requirements in sections 248.3(d)(3), 248.4(b)(3)(i)(A),
248.4(c)(3)(i), 248.11(a)(2), 248.11(a)(8)(i), 248.20(c), 248.20(e), 248.20(f), and 248.20(i) are
event-generated and do not follow a specific time schedule.
Under section 248.12(e), an application for extension of the period of time to meet the
requirements on ownership limitations in a covered fund must be submitted to the Board at least
90 days prior to expiration of the applicable time period.
Under section 248.20(d), unless the appropriate agency notifies the banking entity in
writing that it must report on a different basis, a banking entity with $50 billion or more in
trading assets and liabilities must report the information required by Appendix A for each
calendar month within 30 days of the end of the relevant calendar month. Beginning with
information for the month of January 2015, such information must be reported within 10 days of
the end of that calendar month. Any other banking entity subject to Appendix A must report the
information required by Appendix A for each calendar quarter within 30 days of the end of that
calendar quarter unless the appropriate agency notifies the banking entity in writing that it must
report on a different basis.
Under section 248.5(c), for certain purchases or sales of financial instruments for riskmitigating hedging purposes, the banking entity must create and retain records sufficient to
demonstrate compliance for at least five years in a form that allows the banking entity to
promptly produce such records to the appropriate agency on request, or such longer period as
required under other law or this part.
Under section 248.20(b), a banking entity with total consolidated assets of $10 billion or
more must maintain records of the compliance program sufficient to demonstrate compliance
with section 13 of the BHC Act and applicable regulations, which a banking entity must
promptly provide to the Board upon request and retain for a period of no less than five years or
such longer period as required by the Board.
Under section 248.20(d), certain banking entities engaged in certain proprietary trading
activities must, for any quantitative measurement furnished to the appropriate agency(ies)
pursuant to 248.20(d) and Appendix A, create and maintain records documenting the preparation
and content of these reports, as well as such information as is necessary to permit the appropriate
agency to verify the accuracy of such reports, for a period of five years from the end of the
calendar year for which the measurement was taken.

12

Legal Status
Section 13 of the BHC Act authorizes the Board and the other agencies to issue rules to
carry out the purposes of the section (12 U.S.C. § 1851(b)(2)). In addition, section 13 requires
the agencies to issue regulations regarding internal controls and recordkeeping to ensure
compliance with section 13 (12 U.S.C. § 1851(e)(1)). The information collection is required in
order for covered entities to obtain the benefit of engaging in certain types of proprietary trading
or investing in, sponsoring, or having certain relationships with a hedge fund or private equity
fund, under the restrictions set forth in section 13 and the final rule.
As required information, the information submitted under sections 248.12(e) and
248.20(d) of the rule can be withheld under exemption 4 of the Freedom of Information Act
(FOIA) if disclosure would result in substantial competitive harm (National Parks and
Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974)). The information required
to be submitted meets this test, as detailed below. In addition, the information is “contained in or
related to examination, operating, or condition reports prepared . . . for the use of” the Board, and
thus may be withheld under exemption 8 of FOIA. Under section 248.12(e), the banking entity,
as part of any request to extend the period to divest ownership of a covered fund, must provide to
the agency (among other information) the total exposure of the banking entity to the covered
fund and its materiality to the institution; the risks and costs of disposing of, or maintaining the
fund, within the applicable period; and the contractual terms governing the banking entity’s
interest in the covered fund. Among the types of information required to be submitted under
section 248.20(d) and Appendix A are (1) risk and position limits and usage, (2) risk factor
sensitivities, (3) Value-at-Risk and stress Value-at-Risk, (4) comprehensive profit and loss
attribution, (5) inventory turnover, (6) inventory aging, and (7) customer facing trade ratio.
Disclosure of this type of internal proprietary business information would clearly cause
substantial competitive harm.
Regarding the information contained in the rule subject to recordkeeping requirements
only, no issues of confidentiality normally would arise. If such information were gathered by the
Federal Reserve during the course of supervisory examinations and inspections, however, such
information normally would be deemed exempt under exemption 8 of FOIA. The information
collected in response to these recordkeeping requirements would be confidential commercial and
financial information of the type normally exempt from disclosure under exemption 4 of FOIA,
if gathered by the Federal Reserve. Such information includes the banking entity’s liquidity
management plan to qualify for certain regulatory exclusions under section 248.3(d)(3);
documentation requirements for certain hedging transactions or exemptions under sections
248.5(c) and 248.11(a)(2); and a detailed compliance program (or equivalent trading policies and
procedures) under sections 248.20(b)-(f).
Consultation Outside the Agency
The Board worked with the OCC, FDIC, CFTC, and SEC to amend the regulation that is
requiring this revision.

13

Public Comments
On February 28, 2020, the agencies published a notice of proposed rulemaking in the
Federal Register (85 FR 12120) requesting public comment on the extension, with revision, of
the FR VV. The comment period for this notice expired on April 1, 2020. The agencies did not
receive any specific comments related to the Paperwork Reduction Act analysis. On July 31,
2020, the agencies published a final rule in the Federal Register (85 FR 46422).
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for FR VV is 28,232
hours, and would increase to 36,112 hours with the revisions. The Board takes burden for all
institutions under a holding company including OCC supervised institutions, FDIC supervised
institutions, banking entities for which the CFTC is the primary financial regulatory agency, and
banking entities for which the SEC is the primary financial regulatory agency. The agencies
estimate that the new recordkeeping requirement would be incurred once a year with an average
hour per response of 10 hours. The agencies estimate that the disclosure requirement’s current
average hours per response of 0.1 would increase to 0.5. These reporting, recordkeeping, and
disclosure requirements represent less than 1 percent of the Board’s total paperwork burden.

FR VV
Current
Initial Setup
Reporting
Section 248.4(c)(3)(i)
Section 248.12(e)
Section 248.20(d) ($20 billion
or more) (FR VV-1)
Section 248.20(i)
Recordkeeping
Section 248.3(d)(3)
Section 248.4(b)(3)(i)(A)
Section 248.4(c)(3)(i)
Section 248.5(c)
Section 248.11(a)(2)
Section 248.20(b)
Section 248.20(c)
Section 248.20(d) ($20 billion
or more)
Section 248.20(e)

Estimated
number of
respondents1

Annual
frequency

Estimated
Estimated
average hours annual burden
per response
hours

1
1
1

1
1
1

1

1

1
1
1
1
1
1
1
1

1
1
1
1
1
1
1
1

3
2
0.25
80
10
795
300
10

3
2
0
80
10
795
300
10

1

1

200

200

1

0.25
50
125
20

0
50
125
20

Of these respondents, none are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $600 million in total assets), https://www.sba.gov/document/support--table-size-standards.

14

Section 248.20(f)(1)
Section 248.20(f)(2)
Disclosure
Section 248.11(a)(8)(i)
Current Initial Setup
Ongoing Compliance
Reporting
Section 248.4(c)(3)(i)
Section 248.12(e)
Section 248.20(d) ($20 billion
or more) (FR VV-1)
Section 248.20(i)
Recordkeeping
Section 248.3(d)(3)
Section 248.4(b)(3)(i)(A)
Section 248.4(c)(3)(i)
Section 248.5(c)
Section 248.11(a)(2)
Section 248.20(b)
Section 248.20(c)
Section 248.20(d) ($20 billion
or more)
Section 248.20(e)
Section 248.20(f)(1)
Section 248.20(f)(2)
Disclosure
Section 248.11(a)(8)(i)
Current Ongoing Compliance

1
1

1
1

8
100

1

1

0.1

0
1,703

243
25
12

20
10
4

0.25
20
41

1,215
5,000
1,968

5

1

255
255
255
12
255
12
12
12

1
4
40
1
1
1
1
1

12
216
27

1
1
1

255

26

20

100

1
2
0.25
40
10
265
100
10

255
2,040
2,550
480
2,550
3,180
1,200
120

200
8
40

2,400
1,728
1,080

0.1

Current Total
Proposed
Initial Setup
Reporting
Section 248.4(c)(3)(i)
Section 248.12(e)
Section 248.20(d) ($20 billion
or more) (FR VV-1)
Section 248.20(i)
Recordkeeping
Section 248.3(d)(3)
Section 248.4(b)(3)(i)(A)

8
100

663
26,529
28,232

1
1
1

1
1
1

1

1

20

20

1
1

1
1

3
2

3
2

15

0.25
50
125

0
50
125

Section 248.4(c)(3)(i)
Section 248.5(c)
Section 248.10(c)(18)(ii)(B)(1)
Section 248.11(a)(2)
Section 248.20(b)
Section 248.20(c)
Section 248.20(d) ($20 billion
or more)
Section 248.20(e)
Section 248.20(f)(1)
Section 248.20(f)(2)
Disclosure
Section 248.11(a)(8)(i)
Proposed Initial Setup
Ongoing Compliance
Reporting
Section 248.4(c)(3)(i)
Section 248.12(e)
Section 248.20(d) ($20 billion
or more) (FR VV-1)
Section 248.20(i)
Recordkeeping
Section 248.3(d)(3)
Section 248.4(b)(3)(i)(A)
Section 248.4(c)(3)(i)
Section 248.5(c)
Section 248.10(c)(18)(ii)(B)(1)
Section 248.11(a)(2)
Section 248.20(b)
Section 248.20(c)
Section 248.20(d) ($20 billion
or more)
Section 248.20(e)
Section 248.20(f)(1)
Section 248.20(f)(2)
Disclosure
Section 248.11(a)(8)(i)
Proposed Ongoing Compliance

1
1
255
1
1
1
1

1
1
1
1
1
1
1

0.25
80
10
10
795
300
10

1
1
1

1
1
1

200
8
100

255

1

0.5

128
4,381

243
25
12

20
10
4

0.25
20
41

1,215
5,000
1,968

5

1

255
255
255
12
255
255
12
12
12

1
4
40
1
1
1
1
1
1

12
216
27

1
1
1

255

26

20

0
80
2,550
10
795
300
10
200
8
100

100

1
2
0.25
40
10
10
265
100
10

255
2,040
2,550
480
2,550
2,550
3,180
1,200
120

200
8
40

2,400
1,728
1,080

0.5

3,315
31,731

Proposed Total

36,112

Change

7,880

16

The current estimated total annual cost to the public for the FR VV is $1,630,398, and
would increase to $2,085,468 with the revisions.2
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The cost to the Federal Reserve System is negligible.

2

Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $20, 45% Financial Managers at
$71, 15% Lawyers at $70, and 10% Chief Executives at $93). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2019, published March 31, 2020, https://www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined
using the BLS Standard Occupational Classification System, https://www.bls.gov/soc/.

17