By Andrew Ackerman
WASHINGTON--The Securities and Exchange Commission on Wednesday
took the first in a series of steps aimed at giving regulators a
better handle on risk in the $60 trillion asset-management
industry.
The SEC voted 5-0 to significantly boost the volume of data the
agency collects from the industry, requiring mutual-fund firms such
as Fidelity Investments and BlackRock Inc. to give regulators more
detailed and frequent information about the assets in their funds.
The proposal includes requirements that funds report on their use
of complex and potentially-risky derivatives products, data that
isn't frequently or consistently captured by the SEC.
Wednesday's proposal comes amid a debate in Washington about
whether the asset-management industry is vulnerable to stresses,
such as widespread investor redemptions, that could roil markets
and destabilize the financial system.
The proposal will "vastly improve the type and format of the
information that funds provide to the commission and to investors,"
SEC Chairman Mary Jo White said.
Wednesday's move also is the first in a series of initiatives
Ms. White said would boost the SEC's oversight of asset managers.
The rules are somewhat similar to requirements put in place
following the 2008 financial crisis for big banks and other large
financial institutions that regulators believe could pose a risk to
the financial system and economy if they were to collapse.
Additional proposals, expected later this year, will require
funds to better manage liquidity risks--the ability to easily buy
and sell asset holdings--as well as subject them to "stress tests"
to ensure they can survive a crisis and force them to detail how
they could be dismantled in the event of a major disruption in
their business.
The SEC has been criticized by some Federal Reserve officials as
being slow to address systemic risk in the markets it oversees. The
commission acted to limit risks of investor stampedes out of
money-market mutual funds last year, under pressure from a council
of regulators called the Financial Stability Oversight Council, as
well as global regulators.
Daniel Gallagher, a Republican member of the SEC, disputed the
"many false narratives" that inaccurately portray the SEC's
oversight of asset manager as deficient and the industry as
systemically risky. "These narratives are, of course,
preposterous," he said.
Still, Mr. Gallagher said Wednesday's proposals would make the
SEC more sophisticated overseers of asset managers "and at the same
time illustrate to the bank regulator Illuminati that the SEC is
more than up to the task."
SEC officials said the new disclosures will give the commission
better vision into securities lending activities, how funds will
react to a rise in interest rates as well as more details about
funds' derivatives counterparties. Much of the information would be
reported on a monthly basis and some of it would be disclosed to
the public with a 60 day delay.
The SEC will collect comment on the measures and would have to
vote on them a second time before they can go into effect.
Write to Andrew Ackerman at andrew.ackerman@wsj.com
Access Investor Kit for BlackRock, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US09247X1019
Subscribe to WSJ: http://online.wsj.com?mod=djnwires