FSOC Interpretive Guidance Proposal
Summary
SIFMA AMG provided comments to the Financial Stability Oversight Council in response to its proposed Interpretive Guidance (“Proposal” or “Proposed Guidance”) relating to the Council’s authority to require supervision and regulation of certain nonbank financial companies.
The Proposed Guidance makes key changes to the existing guidance that we strongly support and welcome. These include adopting and prioritizing an activities-based approach, leveraging the data, expertise, and existing regulatory frameworks of primary regulators, and making entity-specific designation a last resort – instead of the only option under current guidance. These significant and positive proposed changes are of critical importance to members of our organization, which represents a broad and substantial spectrum of asset management companies.
Excerpt
Financial Stability Oversight Council
Attn: Mark Schlegel
1500 Pennsylvania Avenue, NW Room 2208B
Washington, DC 20220
Via Electronic Filing
Re: Authority To Require Supervision and Regulation of Certain Nonbank Financial Companies; RIN 4030-ZA00
Dear Mr. Schlegel:
The Asset Management Group (“AMG”)1 of the Securities Industry and Financial Markets Association (“SIFMA”) appreciates the opportunity to provide our comments to the Financial Stability Oversight Council (“FSOC” or “Council”) in response to its proposed Interpretive Guidance (“Proposal” or “Proposed Guidance”) relating to the Council’s authority to require supervision and regulation of certain nonbank financial companies.2
The Proposed Guidance makes key changes to the existing guidance that we strongly support and welcome. These include adopting and prioritizing an activities-based approach, leveraging the data, expertise, and existing regulatory frameworks of primary regulators, and making entity-specific designation a last resort – instead of the only option under current guidance. These significant and positive proposed changes are of critical importance to members of our organization, which represents a broad and substantial spectrum of asset management companies.3
We have been closely engaged on issues relating to nonbank financial companies since the enactment of the Dodd-Frank Act.4 During the past several years, we have been actively involved in opposing bank-style prudential regulation of asset management activities and the potential designation of asset managers and investment funds as nonbank systemically important financial institutions (“SIFIs”) under provisions of the Dodd-Frank Act. Our activities have included letters to FSOC, the U.S. Securities and Exchange Commission (“SEC”), and the Financial Stability Board (“FSB”).5
We appreciate the work that the Council and Treasury Department have already accomplished, including appropriate actions to rescind the designations of nonbank SIFIs. We applauded the President’s orders directing the Treasury Department to examine how financial laws, treaties, regulations, and guidance comport with certain Core Principles and to issue a separate report mandating a thorough review of the nonbank designation process.6 We strongly agreed with the Treasury Department’s reform recommendations in its 2017 report on FSOC’s nonbank SIFI designation process.7 The Dodd-Frank Act is now nearly a decade old, and we believe these actions have helped to lay the foundation for a more transparent, inclusive, and effective use of the Council’s authority.8