The Financial Stability Oversight Council on Tuesday urged banks to develop stiff internal compliance programs to prevent violations of potential limitations on proprietary trading and investments in hedge funds and private equity funds.
The limits are part of the so-called "Volcker Rule," section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that President Barack Obama signed in July.
As part of a set of Volcker pre-rule writing recommendations, the FSOC said a sufficiently robust compliance system could require establishing internal policies and procedures to detect and eliminate proprietary trading, including the creation of recordkeeping and reporting systems to help in compliance and enforcement.
The FSOC also said bank compliance departments could be advised to establish ways to monitor trading and to ensure that trading types and risks are consistent with Volcker Rule barriers.
The FSOC recommended that quality control should also take the form
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