The Financial Stability Board (FSB), an international body established by the G-20 in response to the 2008 financial crisis, on June 22, 2016 released its third Consultative Document relating to the regulation and oversight of the global asset management industry (Proposal). The Proposal follows previous Consultative Documents in 2014 and 2015, which focused on designating asset managers and investment funds as global systemically important financial institutions (G-SIFIs), and reflects, to some extent, the impact of educational efforts and formal comments by the asset management industry on the prior Consultative Documents. The Proposal represents a new focus by the FSB on activities-based policy recommendations to address perceived threats to global financial stability posed by asset managers and investment funds.
In the Proposal, the FSB identifies, and is seeking public comment on, four principal areas of perceived concern: (1) liquidity and redemption challenges for funds; (2) funds’ use of leverage; (3) operational risks and issues in transferring assets under management; and (4) securities lending by asset managers and funds.
The U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, and Securities and Exchange Commission (SEC) represent the United States on the FSB, and the heads of those agencies are also voting members on the U.S. Financial Stability Oversight Council (FSOC). The interplay between global and U.S. regulation of asset management will be the subject of a forthcoming guide by Dechert.
Interested firms should consider participating in the comment process. Comments on this Proposal are due by September 21, 2016.
Read "FSB Issues Proposed Activities-Based Financial Stability Recommendations for the Global Asset Management Industry."