SEC Director of Investment Management Addresses Asset Management Globalization Challenges

Director of the SEC Division of Investment Management William Birdthistle described regulatory developments and the challenges of globalization and interconnectedness to the asset management industry.

In an annual address on SEC Regulation Outside the United States, Mr. Birdthistle highlighted geopolitical events in Eastern Europe which "had significant effects on transactions in the Russian equity markets and relevant markets for Russian equity securities generally." He said that the result was that "certain U.S. funds experienced a circumstance in which virtually all of their direct and indirect holdings of Russian equity securities became illiquid and were fair valued at or near zero." He said that the CFTC responded by granting relief to certain funds to temporarily suspend the right of redemption for the protection of the funds' shareholders. He also stated that CFTC staff is responding to cross-border challenges like MiFID II by "rely[ing] on constructive engagement from market participants with an understanding of operational dynamics and practicalities." He also noted that single stock ETFs have made their "debut" in the United States.

Mr. Birdthistle also highlighted proposed or adopted rules "that reflect our understanding of the reality of globalization in the asset management industry." He cited a proposed rule and form amendments on liquidity risk management programs and swing pricing for open-end funds. He said that the "proposal reflects, in part, our understanding of how some European funds already operate, specifically with respect to swing pricing." He also noted a rule proposal on outsourcing by investment advisers "that would establish a set of minimum and consistent due diligence and monitoring obligations for SEC-registered investment advisers that outsource certain functions or services."