Agencies Issue Final Standards for Assessing the Diversity Policies and Practices of Regulated Entities
A number of federal agencies, including the Board of Governors of the Federal Reserve System ("FRB"), the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation ("FDIC"), the National Credit Union Administration ("NCUA"), the Office of the Comptroller of the Currency ("OCC") and the SEC (collectively, the "Agencies"), issued a final interagency policy statement establishing joint standards for assessing the diversity policies and practices of the entities they regulate.
Dodd-Frank Section 342 requires the Agencies to establish an Office of Minority and Women Inclusion ("OMWI") at each agency to be responsible for all matters relating to diversity in management, employment and business activities, as well as establishing standards for assessing the diversity policies and practices of the agencies' regulated entities.
According to the Agencies, the final standards provide a framework for regulated entities to create and strengthen their diversity policies and practices.
SEC Commissioner Luis A. Aguilar issued a statement of dissent regarding the interagency policy statement. In his statement, he explained that the Agencies "disregard and dismiss the vast majority of comments received from Members of Congress, civil rights organizations, community-based organizations" and other groups regarding a number of concerns, including:
- First, that allowing the voluntary disclosure of information by regulated entities is prohibited under Section 342 of the Dodd-Frank Act because it renders the statute ineffective and fails to achieve the Congressional intent of advancing diversity in the financial services industry.
- Second, that voluntary self-assessments are ineffective because without specific obligations and requirements, few regulated entities conduct assessments or share assessment information.
- Third, that failing to include standard criteria and uniform metrics for assessing the diversity and inclusion practices at regulated entities will make it difficult, if not impossible, to assess diversity at different firms.
- Fourth, that a purely voluntary requirement, and one that lacks a reporting timeline, also lacks transparency and accountability. Firms can therefore decide not to conduct any assessment and treat any OMWI oversight as optional or irrelevant.
- Fifth, that OMWI would fail to satisfy its Congressional mandate under Section 342 by simply monitoring voluntary reports that may or may not be filed by regulated entities.
- Finally, that an overly narrow definition of "diversity" would fail to accomplish the goals intended by the drafters of Section 342. In fact, the Final Policy Statement’s definition of "diversity" excludes people with disabilities as well as the entire LGBT community.
Commissioner Aguilar also stated that the Agencies failed to explain their rationale for the policy choices made in the final interagency policy statement, and did not make their policy choices transparent. He noted that a "good opportunity to have a real positive impact on diversity and inclusion has been squandered," and that the Agencies chose to do what is convenient for companies "rather than doing the right thing for the long-term benefit of our country."