Wall Street banks would face much looser restrictions on investing in venture-capital funds under regulators’ latest rollback of the Volcker Rule, according to three people familiar with the matter.

Making it easier for lenders to take stakes in venture funds is among changes that the Federal Reserve and other watchdogs are set to propose this week, said the people, who requested anonymity to discuss the plan. The Dodd-Frank Act rule has been a top target of regulators appointed by President Donald Trump and some of the agencies involved plan to vote on the fresh overhaul Jan. 30.

The Fed, Securities and Exchange Commission and other agencies last year finished a major revamp of the rule’s ban on banks speculating with their own cash. That prohibition was meant to curtail dangerous risk-taking on Wall Street after the 2008 financial crisis, but the broader rule also shut off the banks’ ability to make major investments in private equity, venture capital and hedge funds.

A decade after the crash, regulators are rethinking some of those restrictions. Besides clearing a path for more venture-capital fund investment, the people said the new proposal will also ease business dealings between banks and family offices, which manage the wealth of affluent investors.

Next Unicorn

The relaxed rules could help banks that are looking to seize on the desire from institutions and wealthy individuals for an early stake in the next unicorn startup. Being able to keep more of their own capital in venture capital funds is useful for banks to show clients they have skin in the game.

Even with the Volcker Rule restrictions, banks have found ways to invest in startups over the past decade, leading to some huge wins. Goldman Sachs Group Inc. saw a $5 million wager on Uber Technologies Inc. its bankers made in 2011 grow into a stake worth hundreds of millions of dollars by the time the ride-sharing company went public last year.

Spokesmen for the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency declined to comment on what will be released. The SEC and the Commodity Futures Trading Commission didn’t respond to requests for comment.

Comptroller of the Currency Joseph Otting told reporters last week that he and the other regulators involved are in unity on the revisions, but he declined to get into the details of the changes. He said the existing rule went “way too far,” and the overhaul “brings it back toward the middle.”

Regulatory Overreach

Wall Street lobbyists, who have long complained that the original Volcker Rule was a product of regulatory overreach, have found sympathy among Trump’s appointees. The agencies have worked for months to finish this final piece of the overhaul. The proposal will be opened for public comment before it can be finalized.

Banks such as Goldman Sachs maintain operations that invest in startups, and industry lobbying groups have argued that letting them put money into venture funds “would permit banking entities to engage in the same sort of safe and sound, long-term investment activities indirectly through fund structures that they are expressly permitted to engage in directly,” as the Securities Industry and Financial Markets Association put it in a 2018 letter to regulators.

Bank lobbyists have argued that restricting investments in venture-capital funds was never the intent of Congress when it passed Dodd-Frank. One of its authors, then-Senator Chris Dodd, said in the Congressional Record in 2010 that “properly conducted venture capital investment will not cause the harms at which the Volcker rule is directed,” and it should be exempted from excessive restrictions.

Proponents say venture capital supports entrepreneurs in growing businesses that may not yet be large enough for mainstream investment. Senate Banking Committee Chairman Mike Crapo encouraged regulators at a hearing last month to “take quick action to address the ‘covered funds’ issue by revising the definition’s overly-broad application to venture capital, other long-term investments and loan creation.”

In revising the Volcker Rule’s proprietary trading ban last year, the regulators had already relaxed one component of the limits on investment in funds, clarifying the industry’s ability to do so on behalf of clients.

Backing off some of the fund restrictions will “complete the process of neutering the rule,” Marcus Stanley, policy director at Americans for Financial Reform, said in a criticism of the regulators’ actions last year.