Release Date: May 28, 2015
Contact: Liz Pierce, 212-313-1173, [email protected] 

SIFMA’s Asset Management Group Urges FSB and IOSCO to Drop Efforts to Create Systemic Risk Methodology for Asset Managers and Funds

Washington, DC, May 28, 2015 – SIFMA’s Asset Management Group (“SIFMA AMG”) today submitted a comment letter expressing concerns with the second public consultation on Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions, published by the Financial Stability Board (“FSB”) and the International Organization of Securities Commissions (“IOSCO”). 

SIFMA AMG strongly encourages FSB/IOSCO to drop their efforts to create a methodology to designate asset managers and funds as systemically important and instead focus on FSB’s recently announced workstream that is considering asset management products and activities.  

Such a revised approach would better reflect the nature of the asset management business and its differences from other financial entities, and enable FSB/IOSCO to better align with and leverage efforts currently underway by U.S. and other national regulators, including the U.S. Securities and Exchange Commission (“SEC”).  These national and international regulatory initiatives to assess asset manager products and activities should be evaluated in detail before FSB/IOSCO can reasonably conclude that any additional regulation is warranted.   

“This second consultation does not reflect the avalanche of empirical studies and substantive comments that highlight how asset managers and investment funds do not present systemic risk, making G-SIFI designation at the entity level ineffective at best,” said Timothy Cameron, managing director and head of SIFMA AMG. “SIFMA AMG is concerned that the second consultation could lead to increased costs and other negative consequences for investors and capital markets without actually addressing any systemic risk concerns.”  

Cameron added, “FSB and IOSCO’s continued focus on entity size does not accurately reflect risk factors in the asset management industry. We respectfully encourage FSB/IOSCO to focus on their review of products and activities, and we are encouraged by recent comments by FSB chairman Mark Carney that seem to suggest FSB/IOSCO may be shifting their focus in this direction. Going forward, we hope that FSB/IOSCO will proceed in a coordinated manner, facilitating harmonization of policies and sharing information rather than focusing on needless and potentially harmful designations.”   

SIFMA AMG’s letter highlights key concerns with the second consultation:

• Jurisdictional Issues: The G-20 did not give FSB/IOSCO a specific mandate to designate investment funds or asset managers as systemically important.
• Process Issues: FSB/IOSCO should review lessons to be learned from the FSOC Notice on Products and Activities, as well as the SEC’s current initiatives to collect data on the asset management industry.Additionally systemic risk regulatory efforts under way in other jurisdictions, such as Canada and the EU, should also be completed before any international body proceeds in determining whether further steps are warranted.
• Methodological Questions: There does not seem to be any real analysis of the comments generated by over 50 commenters on the First Consultative Document.FSB/IOSCO seem to be putting the cart before the horse – a full review and analysis of data collected on products and activities would provide far more information on any potential risks in the industry, rather than a needless and harmful entity designation methodology.  

SIFMA AMG’s full comment letter is available here: http://www.sifma.org/issues/item.aspx?id=8589954882 

SIFMA’s Asset Management Group members are primarily U.S.-based asset management firms whose combined assets under management exceed $30 trillion. The global client base of SIFMA AMG member firms include, among others, registered investment companies, endowments, state and local government pension funds, private sector Employee Retirement Income Security Act of 1974 pension funds and private funds such as hedge funds and private equity funds.