FSOC Announces Changes to Non-Bank Designation Process, Extends Asset Management Comment Period (with Lofchie Comment)

The Financial Stability Oversight Council ("FSOC") voted to adopt and formalize certain practices relating to its process for reviewing non-bank financial companies for potential designation, with the stated goals of promoting active engagement with companies under consideration and increasing transparency to the public.

FSOC's supplemental guidance describing these procedures is available here. The changes, which are effective immediately, fall into three categories:

• Heightened Engagement with Companies under Evaluation. FSOC will notify any non-bank financial company under consideration during Stage 2 of the evaluation process, rather than only upon its advancement to Stage 3;
• Heightened Engagement during Annual Reevaluations of Determinations. FSOC will provide each company that is subject to a determination with an opportunity for an oral hearing before the Council every five years, and will provide notice explaining the basis for decisions not to rescind contested determinations after an annual reevaluation;
• Transparency to the Broader Public Regarding the Designation Process. FSOC will publicly release written explanations of any final determinations made with regard to non-bank financial companies, and will publicly confirm the status of a company's review upon request by that company.

In addition to adopting the supplemental procedures described above, FSOC voted to extend the deadline on its Notice seeking public comment on potential risks to U.S. financial stability from asset management products and activities. The deadline was extended to March 25, 2015.

Lofchie Comment: Beyond improving the process, the priority should be to allow previously designated companies a better opportunity to challenge their designation.

See: FSOC Supplemental Guidance; FAQs on Non-bank Designations; FSOC Press Release. See also: SIFMA Statement on Changes to FSOC Process; Review of FSOC Meeting. Related news: FSOC Requests Information on the Asset Management Industry (with Lofchie Comment) (January 30, 2015); FSOC to Change SIFI Designation Process (with Lofchie Comment) (January 22, 2015); MetLife to Ask Federal Court to Review SIFI Designation (with Lofchie Comment and YouTube Selection) (January 14, 2015).