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September 08, 2014 at 10:56 AM
The mutual fund industry’s trade group said Monday that it welcomed the news that the Securities and Exchange Commission is mulling new rules to assess systemically important risks in mutual funds, hedge funds and asset managers.
“We welcome greater involvement by the Securities and Exchange Commission, as the primary regulator for funds and asset managers, in questions of financial stability,” said Paul Schott Stevens, president and CEO of the Investment Company Institute, in a Monday statement.
“Any risks that may arise in asset management are best addressed by the SEC, which has a highly successful track record of regulating funds and advisors under statutory authority for almost 75 years,” Schott Stevens said. “While we await the details of any proposed rules, we look forward to working with the Commission as it develops targeted rules through an open process with public notice and comment.”
The Financial Stability Oversight Council announced last September that it was studying the activities of asset management firms to better inform its analysis of whether — and how — to consider such firms for enhanced supervision under Section 113 of the Dodd-Frank Act.
Wall Street’s trade group, the Securities Industry and Financial Markets Association, as well as big asset management companies came out against FSOC considering designating asset managers as systemically important financial institutions, called SIFIs.
FSOC said at its July 31 meeting that instead of focusing on asset management companies as possible SIFIs, it would take “a more focused analysis of industry-wide products and activities” to assess potential risks associated with the asset management industry.
FSOC shifting its focus to specific products and activities is “a good opinion,” Scott Burns, global head of manager research at Morningstar, told ThinkAdvisor in a Monday interview. “When you look at the financial crisis and the way the asset managers and the 1940 Act funds performed, [it] worked remarkably.” The Investment Company Act of 1940 “has a tremendous amount of quality architecture to it — in terms of limiting leverage and where assets get custodied and public transparency,” he said. “You can look at how the ‘40 act mutual funds and the companies that provide them performed during the crisis and it was more or less exemplary.”
