Asset managers: The SEC’s road ahead

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May 2015


The debate over asset managers’ potential systemic risk has been ongoing for some years, with little agreement among the industry, US regulators, and global standard setting bodies. US regulators themselves have been divided – the SEC has been particularly skeptical that asset managers or individual funds can be the source of systemic risk of a magnitude akin to that posed by large banks.

With the designation of asset managers as systemically important financial institutions by the Financial Stability Oversight Council now off the table for the foreseeable future, the SEC has assumed a more prominent regulatory role. The agency is expected to take its first major step this week by proposing enhanced data reporting requirements for investment advisers and funds. As indicated by SEC Chair Mary Jo White, this action will then be followed by additional requirements for asset managers or individual funds around liquidity risk management, the use of derivatives, stress testing, and transition planning.

We expect these requirements to primarily affect traditional mutual funds and their advisers, with the new stress testing rule potentially being very impactful. Such a rule would apply to over a hundred individual US funds with over $10 billion in consolidated assets (in addition to advisers). Exchange-traded funds and others will likely also be affected by specific new requirements, e.g., around the use of derivatives.

This A closer look provides pertinent background, along with our view of the SEC’s upcoming regulations and timeline for SEC action.

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Dan Ryan

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Alison Gilmore

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