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Board Report:  July 31, 2012

Review of the Unauthorized Disclosure of a Confidential Staff Draft of the Volcker Rule Notice of Proposed Rulemaking


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We evaluated whether staff of the Board or Federal Reserve Bank of New York (FRB New York) had knowledge of or played a role in the unauthorized disclosure of a confidential staff draft of the Volcker Rule Notice of Proposed Rulemaking (NPRM). As part of our review, we also assessed the Board's information-sharing practices for rulemaking activities.

Section 619 of the Dodd-Frank Act, which amends the Bank Holding Company Act of 1956, contains two key prohibitions on the activities of insured depository institutions, Bank Holding Companies, and their subsidiaries or affiliates. These prohibitions are commonly known as the Volcker Rule.

The Dodd-Frank Act required the Financial Stability Oversight Council (FSOC) to conduct a study and make recommendations for implementing the provisions of section 619. The FSOC study contained 10 recommendations for implementing the Volcker Rule. Section 619 required the Board, the FDIC, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Commodity Futures Trading Commission to consider the FSOC study's findings and jointly adopt rules to implement its provisions. This interagency rulemaking team met regularly from January 2011 through October 2011 to jointly develop the Volcker Rule NPRM.

As part of this joint rulemaking process, Board employees distributed several versions of the NPRM to the rulemaking team for deliberation, including a version labeled "confidential staff draft" dated September 30, 2011. On October 5, 2011, American Banker, a banking and financial services media outlet, published this nonpublic, confidential staff draft of the NPRM on its website.

Although our review identified several apparent instances of unauthorized disclosures that occurred during the rulemaking process, we did not find any evidence to indicate that these disclosures originated at the Board or at FRB New York. Nonetheless, we identified three recommendations for improving information-sharing controls and procedures for future rulemaking activities.

We provided a copy of our report for review and comment to the Board's General Counsel; the Directors of Banking Supervision and Regulation, the Division of Research and Statistics, and the Division of Information Technology; and FRB New York's Senior Vice President of Markets. The General Counsel's consolidated official response indicated that "serious consideration" would be given to recommendations 1 and 2 and that actions are being taken to address recommendation 3. We will follow up on actions taken to implement each recommendation.