In 2015, the Securities and Exchange Commission (SEC) set an ambitious agenda to address certain risks in the asset management industry as part of its mission to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation. While global regulators did not designate mutual funds or asset managers as Systemically Important Financial Institutions (SIFIs)—which would have labeled their activities as a risk to the global financial system and subjected the industry to rigorous bank-like regulations— the SEC’s strong assertions left no doubt as to which agency is the primary regulator of funds and advisers.
The Securities and Exchange Commission (SEC) pushed ahead with an ambitious agenda to address certain industry risks while strongly asserting itself as the primary regulator of funds and advisers during the year. Three major proposals in the latter part of 2015—on enhanced data reporting, liquidity risk management, and derivatives—comprised the first in a series of planned reforms.
The SEC’s money market reform implementation began with many advisers restructuring fund offerings in response to these changes. Focus continues to be on evolving technical issues, including safeguards surrounding fund and adviser use of social media and requirements for proactive cybersecurity programs, among other initiatives.
Examiners also continued their multiyear review of fund distribution and shareholder servicing expenses. The need for asset managers to implement improved monitoring, tighter controls, and greater transparency in managing third-party risk remained a top priority. While the SEC has proposed and/or adopted substantially all rules mandated under the Dodd-Frank Act, it is clear that the commission’s regulatory, examination, and enforcement posture will continue to proceed at an aggressive pace. In addition, some US states placed increased emphasis on their “blue sky” legislation, which requires the registration of securities to be offered or sold within their states.