By Sarah N. Lynch
The U.S. Securities and Exchange Commission is developing a plan to step up its scrutiny of the country's largest and riskiest asset managers, SEC Chair Mary Jo White said on Friday.
The extra focus on the sector comes as the new U.S. risk council is studying whether large asset managers such as Blackrock and Fidelity could pose systemic risks to the marketplace if they were to fail.
"Among the initiatives under near-term consideration are expanded stress testing, more robust data reporting, and increased oversight of the largest asset management firms," White told an audience at SEC Speaks, an annual conference held by the Practising Law Institute.
The Financial Stability Oversight Council several years ago asked the Office of Financial Research, a unit of economists within the Treasury Department, to study whether large asset managers could pose broader risks to the system.
The council is a group of regulators created by the 2010 Dodd-Frank Wall Street reform law and chaired by the Treasury secretary. Its job is policing the market for possible risks.
The council has the power to designate large financial firms as "systemic," a classification that carries greater capital requirements and subjects the firms to oversight by the Federal Reserve.
Last September, the Office of Financial Research released a report saying that some activities of large asset managers could pose risks to the broader market.
The report triggered a backlash from the industry and some lawmakers, who said it was riddled with flaws and failed to use widely available data to reach its conclusions.
The SEC privately had concerns with the report, and put it out for public comment.
Since then, the industry has been lobbying for the report to be scrapped and has urged the council not to use it as a basis for making designations.
White later told reporters on the sidelines of Friday's conference that the new plan has nothing to do with the council's work.
"It's really a continuation of our regulation and assessment of risks across that space for asset managers," she said. "It is just part of our everyday duties."
As chair of the SEC, White is a voting member of the council.
However, she has not publicly shared her views on whether large asset managers should be candidates for the "systemic" designation.
SEC Republican Commissioner Dan Gallagher, on the sidelines of Friday's conference, told reporters he thought the new plan for reviewing large asset managers is "brilliant."
"We should have been doing it last year," he said.
"We need to take in more data, use the data, have it impact our policymaking, and then use it to be able to communicate better with other policymakers. And we can only do that through a new program."