Bank-like regulation headed to funds and advisory industry

increase regulations fund blog
October 5, 2016

Recent oversight actions by the Financial Stability Oversight Committee (FSOC) of the U.S. Treasury are prompting unfavorable comparisons to banking regulations from investment industry professionals.

Committee composition

After the 2008 financial crisis, the FSOC was established to create accountability and guidance to financial market regulators. The committee looks across the insurance, investment, and banking industries to assess systemic risks, evaluate hazardous trends, and draw attention to governance gaps.

For example, the disorderly wind-down of Lehman Brothers led to FSOC authority that allowed it to designate institutions as systemically important financial institutions. This action then mandated that these firms establish resolution and recovery plans.

Although the FSOC is composed of leaders from each industry, it's heavily influenced by bank regulators. This is perhaps because the Treasury and Federal Reserve, while both tied to banking, have the most experience researching economic and systematic risk.

Expanded regulations

Now regulatory initiatives typically associated with banks, like capital liquidity, operational risk management, and resolution planning, are finding their way into mutual fund governance. SEC examination priorities support this notion of a broader mandate to assess market-wide risks.

These initiatives are in their formative state and haven't come without controversy. Investment industry members have argued large fund complexes don't represent systemic risks to the broader economic system. Investment firms are concerned the new regulations would be costly to investors at best and at worst disruptive to markets.

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Gathering, organizing, and using data in an intelligent way will help companies stay focused on what matters as they meet new reporting requirements. Building structured, repeatable frameworks will become essential overtime.

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Chris Mancini

About the author

Chris Mancini is Senior Product Marketing Manager for Investments and serves as an expert in the investment services industry, providing insight and solutions to support Workiva customers. He has over 15 years professional experience with mutual funds, managed accounts, fund marketplace platforms, advisory, and brokerage services. His hands-on experience with management reporting, financial systems, attestation, and regulatory report preparation provide a valuable resource for customers seeking Workiva reporting solutions.