The trade association for the U.S. securities industry is coming out in opposition to global policymakers’ latest efforts to identify investment funds and asset managers that may pose a systemic risk to the financial system, which could lead to added regulation for these firms.
The U.S. Securities Industry and Financial Markets Association (SIFMA) issued a statement from its Asset Management Group today criticizing the proposed methodology issued by the Financial Stability Board (FSB) and International Organization of Securities Commissions (IOSCO) earlier this week to identify financial firms, other than banks and insurers, that should be considered systemically important.
“We are concerned that this FSB and IOSCO consultation on creating a methodology to assess asset managers and investment funds for potential G-SIFI designation is a significant step in the wrong direction that could lead to negative consequences for investors and capital markets with no meaningful benefit in managing systemic risk,” said Timothy Cameron, managing director and head of SIFMA’s Asset Management Group, in a statement.
“This consultation appears to disregard the meaningful and substantive comments received by the FSB and IOSCO regarding the first methodology consultation, which demonstrated how asset managers and investment funds have fundamentally different risk profiles than banks, making G-SIFI designation at the entity level inappropriate,” he said. “The consultation’s continued focus on size, interconnectedness, complexity, substitutability and cross-jurisdictional activities does not accurately reflect factors which could lead to contagion risk in the asset management industry and therefore is not likely to be effective in managing systemic risk.”
SIFMA argues that instead of creating a global framework for assessing systemic importance, it should be up to asset managers’ primary regulators to determine whether additional regulation is necessary to manage risk.
“We encourage global prudential regulators to pause and allow national systemic risk regulators and primary regulators, such as the Securities and Exchange Commission (SEC), to complete their current initiatives focused on products and activities, and consider the cumulative impact of any new regulations before moving forward with any designations,” Cameron concluded.