On July 16, the SEC (along with other federal regulators) updated its FAQ regarding the Volcker Rule, available here.  In this update, the SEC provided the following information with respect to the “banking entity” status of registered investment companies and foreign public funds during their seeding periods:

The rule implementing section 13 of the BHC Act and the accompanying preamble make clear that a RIC and a foreign public fund (FPF) are not covered funds for purposes of the statute or implementing rules. The preamble to the implementing rules also recognize that a banking entity may own a significant portion of the shares of a RIC or FPF during a brief period during which the banking entity is testing the fund’s investment strategy, establishing a track record of the fund’s performance for marketing purposes, and attempting to distribute the fund’s shares (the so-called seeding period).

Staff of the Agencies would not advise the Agencies to treat a RIC or FPF as a banking entity under the implementing rules solely on the basis that the RIC or FPF is established with a limited seeding period, absent other evidence that the RIC or FPF was being used to evade section 13 and the implementing rules. The staffs of the Agencies understand that the seeding period for an entity that is a RIC or FPF may take some time, for example, three years, the maximum period of time expressly permitted for seeding a covered fund under the implementing rules. The seeding period generally would be measured from the date on which the investment adviser or similar entity begins making investments pursuant to the written investment strategy of the fund.[38] Accordingly, staff of the Agencies would not advise the Agencies to treat a RIC or FPF as a banking entity solely on the basis of the level of ownership of the RIC or FPF by a banking entity during a seeding period or expect an application to be submitted to the Board to determine the length of the seeding period. (footnotes omitted)