House attempts Volcker Rule fix

New legislation passed by the US House would allow some investment funds to share the name of their bank-affiliated sponsor.

A bipartisan bill passed by the House of Representatives last week would allow a bank-affiliated investment advisor or asset management firm to brand the funds it manages with its name, which is currently prohibited under the Volcker Rule.

The Investor Clarity and Bank Parity Act, or HR 4096, would “amend the Volcker Rule to permit certain investment advisers to share a similar name with a private equity fund, subject to certain restrictions,” the bill introduced by Massachusetts Democrat Michael Capuano states.

The bill is now going through the Senate.

If a bank holding company owns a separate affiliate that is an investment advisor – and if that investment advisor's name differs from that of the bank and the bank holding company – then the covered fund could share the name or a variation of that name with that investment advisor, a legal expert told Infrastructure Investor.

However, this would not apply to investment or asset management firms that share the same name with their affiliated bank.

Some bank-affiliated infrastructure fund managers have already made changes to comply with the Volcker Rule, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Morgan Stanley, for example, changed the name of Morgan Stanley Infrastructure Partners II to North Haven Infrastructure Partners II in April 2015 after having already begun fundraising efforts. The firm went on to close the fund on $3.6 billion in March

Other bank-affiliated firms that have also changed the names of their infrastructure funds include Goldman Sachs and Fiera Capital.

Another legal expert Infrastructure Investor spoke with described the proposed legislation as “an incremental improvement” and a “technical fix” whose benefits would essentially be one less legal burden bank-affiliated firms would have to contend with as well as not having to re-brand their offerings.

HR 4096, however, would not reverse the restriction the Volcker Rule places on banks limiting the amount of own capital they can invest in in-house private equity and hedge funds to three percent from 10 percent previously.