The Securities and Exchange Commission (SEC) has proposed a set of liquidity risk management requirements for registered open-end mutual funds and ETFs. The proposal is part of a broader SEC agenda to modernize the Investment Company Act of 1940 (’40 Act) and to address perceived systemic risk concerns relating to the asset management industry.
1. The proposal addresses liquidity concerns arising in a changing industry. The proposal is a response to recent changes in the asset management industry, including the growing presence of mutual funds in the fixed-income space (now holding nearly 20% of US corporate debt; up from 7% … Read more
The debate over asset managers’ potential systemic risk has been ongoing for some years, with little agreement between the industry, US regulators, and global standard setting bodies. US regulators themselves have been divided – the SEC has in particular been skeptical that asset managers or individual funds can be the source of systemic risk of a magnitude akin to that posed by large banks.
Nevertheless, consensus is finally forming on the need to address specific risks of the industry. With the designation of asset managers as systemically important financial institutions (“nonbank SIFIs”) by the Financial Stability Oversight Council (“FSOC”) now … Read more