WASHINGTON May 22 The U.S. regulatory risk
council should make sure it has enough securities market
expertise before deciding whether to designate large financial
firms as systemic, Securities and Exchange Commission Chair Mary
Jo White said on Thursday.
"I think it is enormously important for (the Financial
Stability Oversight Council) before it takes, frankly, any
decisions of any kind, to make certain that it has the requisite
experience ... on those issues," White told fund managers at the
Investment Company Institute's annual meeting in Washington.
White's comments speak to the tensions between the SEC,
which regulates asset managers, and the FSOC, which is looking
at whether the activities of large asset managers could pose
systemic market risks.
The FSOC is a council of regulators created by the 2010
Dodd-Frank law and chaired by the Treasury Secretary. It is
tasked with flagging market risks and can designate large firms
as systemic, a tag that would impose more rules and oversight by
the Federal Reserve.
Large asset managers like BlackRock Inc and Fidelity
have said they should not be designated as systemically
important. On Monday, FSOC held a public conference to learn
more about the industry's activities and potential risks.
The industry is opposed to designations, saying it already
faces strict SEC rules and does not pose systemic risks. It has
accused the FSOC of prematurely reviewing managers without the
proper data or knowledge.
Before the FSOC's conference began, Treasury's Under
Secretary for Domestic Finance Mary Miller downplayed the
industry's fears on Monday, saying it had overreacted and there
was "no predetermined outcome" on designation.
White, who as SEC Chair gets one vote on the 10-member FSOC
panel, countered Miller's comments Thursday, telling the
industry its intense response to the FSOC's inquiries was
"I don't think you are overreacting to the process," she
said. "The issues are ... important on every side."
White also touched on another criticism of the FSOC: that
she as a capital markets regulator is outnumbered by banking
regulator members such as Fed Chair Janet Yellen and Federal
Deposit Insurance Corp Chairman Martin Gruenberg.
That has led the industry to accuse the FSOC of taking a
biased approach to asset managers by viewing them through a bank
lens. They fear designation could lead the council to force bank
capital rules on nonbank financial firms.
White on Thursday did not directly discuss private FSOC
discussions about the designation process or her views on
whether asset managers pose risks.
But she hinted at concerns about the imbalance on the FSOC.
"A number of those 10 voting members are banking regulators,"
she said, versus only two capital markets regulators - herself
and the head of the Commodity Futures Trading Commission.
To correct the problem, she urged the industry to stay
A lot of the expertise "comes and has come and needs to come
from the industry," she told the audience. "You are the
on-the-ground ... experts."
(Reporting by Sarah N. Lynch; Editing by Lisa Von Ahn)