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Franklin: Volcker Rule blocked banks from investing in VC funds

Bobby Franklin · a16z Podcast | Of Policy, Capital, and the Startup Ecosystem · Jan 2, 2019 · at 2:01

Bobby Franklin, President and CEO of the National Venture Capital Association (NVCA), explains the impact of Dodd-Frank banking regulations on early-stage capital formation.

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“The Volcker rule was something that had been put in place, which effectively kept banks from being able to make investments into You know, VC funds or other funds into startups.”

quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →

The claim, plainly

The Volcker Rule prevented commercial banks from investing directly into venture capital funds and startups.

a quote alone can be ambiguous, so this restates it with the references and context of the conversation around it resolved. AI-written; the tape below the player is the source.

Assessment

The claim bundles two assertions regarding the scope of the Volcker Rule prior to 2017: restricting investments in venture capital funds and restricting direct investments in startups. Under the 2013 Volcker Rule regulations (Section 619 of Dodd-Frank), venture capital funds were treated as 'covered funds' because they relied on Section 3(c)(1) or 3(c)(7) exclusions of the Investment Company Act, thereby preventing covered banking entities from investing in VC funds. However, the Volcker Rule did not restrict commercial banks from making direct equity investments in non-fund operating companies or startups, as banks retained direct investment powers under separate authorities such as Merchant Banking Authority under the Gramm-Leach-Bliley Act.

Prior to 2020 amendments, the 2013 Volcker Rule covered fund definitions included venture capital funds relying on Section 3(c)(1) or 3(c)(7), restricting covered banks from investing in VC funds.
The Volcker Rule applied to covered funds (pooled investment vehicles), not direct equity investments in operating companies or startups, which remained permissible under Merchant Banking Authority.

Checked against

[1] pillsburylaw.com [2] treas.gov [3] fdic.gov [4] wikipedia.org [5] windows.net [6] federalreserve.gov [7] federalregister.gov [8] iflr.com

"Volcker Rule" "venture capital funds" "direct investment" startups prohibition Volcker Rule covered funds venture capital direct investment restriction regulations 2013 2014 Volcker Rule Section 619 venture capital funds restrictions Dodd Frank commercial banks "Volcker Rule" "direct investments" startup OR "operating companies" venture capital "merchant banking" "Volcker Rule" direct investment operating companies startup "venture capital funds" "covered funds" "Volcker rule" 2013 2014 2015 did the Volcker rule prohibit direct investments in startups

assessed as of 2026-07-31

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bank VC fund Volcker Rule

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Franklin: Volcker Rule blocked banks from investing in VC funds

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