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IM Director to Industry: We Hear You

In a recent speech, Director of the SEC’s Division of Investment Management David Grim outlined the Division’s work, including three significant rule proposals that would affect funds.  Calling the recent period “one of the most vibrant and innovative periods that I can recall,” Grim highlighted the rule proposals regarding fund reporting, liquidity risk management programs and derivatives.  He encouraged comments, stating that “the rulemaking process works best when it involves a dialogue between the Commission and all the various stakeholders.” 

Grim stated that the Commission had received almost 80 letters commenting on the liquidity risk management proposal.  He noted that most of the letters acknowledged the importance of liquidity risk management programs to open-end funds.  In addition, he stated that some commenters found that “swing pricing could be a worthy endeavor.”  While commenters generally agreed with the Commission’s goals regarding liquidity risk management, he acknowledged that a number of letters suggested that those goals could be better achieved through alternative approaches, particularly with respect to the liquidity management framework and the three day liquid asset minimum.  Although he was unable to speak with any specificity regarding the rulemaking, Grim assured the audience “that we understand your concerns, that we are taking them very seriously, and that they will inform the Division’s thinking as we move toward crafting final rules.  Simply put, we hear you.”

Grim also discussed the Commission’s proposal on mutual fund reporting.  He stated that he views the proposal “as vital to the Division’s mission, since it would allow the Division to broaden and deepen its understanding of funds and the manner in which they operate.”  He noted that commenters generally agreed with the potential benefits of the proposed reporting changes.  He also stated that the staff continued to assess the numerous comments on the portion of the proposal that would allow funds to provide certain information on its website and only provide paper copies at the request of investors.  In addition, he outlined some of the Commission’s steps regarding cyber-security – a primary issue raised by commenters on the proposal.  According to Grim, the Commission’s cyber-security efforts include: requesting a budget increase from Congress for cyber-related efforts; enhancing awareness of information security issues; adopting NIST protocols; and improving responses to unauthorized intrusions. 

Because the comment period on the derivatives proposal remained open, he only briefly mentioned that proposal.  Grim encouraged commenters to include data regarding fund use of derivatives and the potential impact of the proposal in its comments.