SEC steps up regulation of U.S. asset-management business

New rule will enhance reporting requirements and bolster liquidity risk management obligations among mutual funds and ETFs

By: James Langton
October 13, 2016 December 19, 2017
15:50

The U.S. Securities and Exchange Commission (SEC) adopted rule changes on Thursday designed to “modernize and enhance” reporting and disclosure among registered investment companies and to enhance liquidity risk management by open-end funds, such as mutual funds and exchange-traded funds (ETFs).

The new rules will enhance the quality of information available to investors and help the regulator collect and use data reported by funds, the SEC says in a statement.

Specifically, the rules introduce new monthly portfolio reporting forms and a new annual reporting form; enhance disclosure requirements in financial statements; and add new disclosures about securities lending.

In addition, the rules are intended to promote effective liquidity risk management and enhance disclosure about fund liquidity and redemption practices by requiring mutual funds and ETFs to establish liquidity risk management programs; strengthening the limits on illiquid investments; and stepping up disclosure requirements in this area as well.

“These new rules represent a sweeping change for the industry by requiring strong transparency provisions and enhanced investor protections,” says SEC chairwoman Mary Jo White in a statement. “Funds will more effectively manage liquidity risk and both commission staff and investors will receive additional and better quality information about fund holdings.”

The Securities Industry and Financial Markets Association’s (SIFMA) asset-management group (AMG) issued a statement on the new rules, indicating that it has supported efforts to enhance the sector’s regulation.

“While we are still in the process of reviewing the final rules, it is clear that the commission maintained its commitment to the goals of the proposal, including strengthening the SEC’s regulatory effectiveness and protecting investors,” says Timothy Cameron, managing director and head of the SIFMA AMG, in a statement. “We look forward to reviewing the final rules and adoptive guidance and working with the SEC as the industry works toward implementation.”