As we reported last Fall, reaction to an OFR report suggesting that the asset management industry poses systemic risks to the U.S. and global economic systems has been consistent and highly critical. That criticism has been directed at both the substance of the Report and the process that led to it. Now Congress has jumped into the fray. In a letter to Treasury Secretary Jacob Lew dated April 7, 2014, Congressmen Darrell Issa and Jim Jordon, on behalf of the House Committee on Oversight and Government Reform, sharply criticized Treasury's Office of Financial Research (OFR) for its failure to work more closely with the SEC in researching, drafting and revising the report.
The Committee on Oversight and Government Reform had previously asked the SEC and other FSOC agencies to provide documents relevant to the drafting of the OFR report. The April 7 letter uses these documents to show that the SEC staff made numerous comments and raised important concerns throughout the drafting process. For example, the letter quotes the SEC staff as saying to the OFR that the draft report contained “multiple and fundamental inaccuracies” in its description of the SEC’s regulatory framework. The letter also notes that the staff pointed out “citations that did not support the claims being made in the OFR study, as well as instances where the study made claims that needed more support.” The letter notes that the SEC staff criticisms, which were very similar to those raised later by industry commenters, failed to result in changes to the report prior to publication.
The Congressmen allege that the “OFR ultimately ignored or dismissed core criticisms from the career, non-partisan regulatory experts at the SEC,” and suggests that the report was produced as “simply a pretext for further action to designate asset managers as systemically important and not an unbiased and objective review of the industry.”
The letter can be found on the Committee website here, or at this URL: http://oversight.house.gov/wp-content/uploads/2014/04/2014-04-07-DEI-Jordan-to-Lew-Treas-FSOC-due-4-21.pdf