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FSOC Members Applaud SEC’s Asset Management Proposals, Continue Analysis

In a recent meeting, the FSOC discussed it ongoing analysis in six categories of potential risk arising from the asset management sector: “liquidity and redemption risk; leverage; securities lending; data and disclosure; operational risks of service provider concentrations; and resolvability and transition planning.” Treasury Secretary Jack Lew indicated that the FSOC plans to provide a public update in early 2016.

Lew said that “asking tough questions and probing deeper in certain areas of the financial system does not mean that there will always be risks that rise to a sufficient level to warrant action by this body. But not asking questions or bypassing certain sectors of the financial system would by shirking our responsibility and our shared mandate to understand potential risks to financial stability.”

Dave Grim, Director of the SEC’s Division of Investment Management presented an overview of the recent liquidity risk management and reporting modernization proposals. Both Secretary Lew and Federal Reserve Chair Janet Yellen complimented the SEC on its efforts. Yellen noted that “these proposals do represent very important steps to addressing risks and information gaps in the asset management industry that have been a shared concern of the Council and I would see these proposals then as playing an important role in the Council’s consideration of potential risks emanating from this sector.”