Associations Criticize SEC Proposal on Investment Adviser Outsourcing

Several trade associations highlighted concerns about an SEC proposal to establish minimum standards for investment advisers before outsourcing certain services or functions.

In a joint Comment Letter, SIFMA and SIFMA Asset Management Group ("SIFMA AMG") argued that tailored guidance regarding existing fiduciary principles would better achieve the objectives of the SEC's rule proposal. SIFMA and SIFMA AMG recommended that the SEC limit the scope of "covered functions" under the proposal to those "critical" to the adviser's business that would otherwise be undertaken by the adviser itself.

The Investment Company Institute described the proposal as unnecessary, adding that it would also present substantial cybersecurity risks.

In separate comment letters (see here and here), Alternative Investment Management Association ("AIMA") and the Managed Funds Association ("MFA") expressed concern that the proposal would prohibit advisers from outsourcing unless they satisfy overly prescriptive and burdensome requirements. AIMA and the MFA said that the proposal would increase costs for advisers, which would disproportionately affect smaller advisory firms.

The associations also reiterated the need for a longer comment period on the proposal (see previous coverage).