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Senators Call for Outline of SIFI Regulation Prior to Any Asset Manager Designation

A group of nine senators urged Treasury Secretary Jack Lew to consider the impact on asset managers before applying a systemically important designation. The letter was sent the day before the FSOC indicated that it would focus on asset manager activities, potentially as opposed to designating individual firms systemically important. The senators urged the Federal Reserve to detail the system under which nonbank, systemically important institutions would be regulated, and opined that a premature designation would “lead to a legal quagmire and regulatory confusion that could potentially be very costly to our economy.”

The senators also expressed concern that designating asset managers as SIFIs could subject them to dual regulatory regimes.. The group advised caution and consideration ahead of FSOC action and complimented the SEC on the decision to collect public comments on the Office of Financial Research report on the asset management industry. The letter expressed that the FSOC itself should accept comments on future reports and be wary of actions that fall outside of the normal SEC rule-making process, such as the suggestion by Federal Reserve Governor Daniel Tarullo that the Federal Reserve could impose margin requirements on asset manager’s collateralized lending.