The five US financial regulators that are responsible for implementation of Section 13 of the Bank Holding company Act of 1956 (Volcker Rule) have added new guidance in the form of an addition to their list of Frequently Asked Questions (FAQs) that will be helpful to non-US banks seeking to make use of the so-called “SOTUS Exemption” for investments in covered funds that are made solely outside the United States. Availability of the SOTUS Exemption is subject to several conditions, one of which is that “no ownership interest in the covered fund is offered for sale or sold to a resident of the United States . . .” (See 12 C.F.R. Section 248.13(b)(iii).) Many practitioners have been concerned that compliance of this condition would be impossible in relation to a fund marketed by a party other than the relevant banking entity. The new FAQs alleviate that concern by clarifying that the marketing condition applies solely to the activities of the foreign banking entity that is seeking to rely on the SOTUS Exemption (including its affiliates) and not to the marketing activities of third parties. A non-US bank can consequently qualify for the SOTUS Exemption with respect to a covered fund that has some US investors so long as the bank itself was not responsible for the sale of the ownership interests to those investors.  

The new FAQs can be found here