The Volcker Rule, adopted as part of the Dodd-Frank Act, prohibits “banking entities” from engaging in proprietary trading or sponsoring or acquiring interests in so-called “covered funds.”  The Federal Reserve and other federal agencies recently added a new frequently asked question (FAQ) to their Volcker Rule FAQs.  The new FAQ clarifies that certain foreign banking entities may rely on an exemption from the Volcker Rule to invest in a covered fund solely outside of the U.S., even if the fund is offered to U.S. residents, so long as the foreign banking entity does not sponsor or serve in certain management or advisory roles for the fund and does not participate in that offering.  This article summarizes the relevant rules, the ambiguity they presented, the resolution provided by the new FAQ and an important remaining ambiguity.  For a discussion of the impact of the Volcker Rule on foreign managers, see “Dechert Partners Discuss Impact of Volcker Rule on European Hedge Fund Managers,” Hedge Fund Law Report, Vol. 7, No. 12 (Mar. 28, 2014).  For a detailed overview of the Rule, see “Ropes & Gray Attorneys Discuss the Impact on Private Fund Managers of Final Regulations Under the Volcker Rule,” Hedge Fund Law Report, Vol. 7, No. 10 (Mar. 13, 2014).