The Financial Stability Oversight Council (FSOC) continues to increase its scrutiny of financial stability issues presented by asset management products and activities. A recent statement regarding the FSOC’s ongoing review of asset managers indicates an increased interest in expanding data collection efforts from the industry and potentially extending regulatory oversight to the industry similar to the banking sector. An interagency group has been formed with a mandate to submit a report on related issues specific to hedge funds during the fourth quarter of 2016.
The action comes at a time when policymakers and market participants continue to express concerns about low levels of liquidity in the bond markets that merit consideration by the industry. Bank-run collective investment funds (CIFs) as well as pension funds and insurance companies are under the FSOC’s scrutiny either directly or in relation to their engagement as counterparties with asset managers. It is unclear, however, whether the Securities and Exchange Commission (SEC) will implement the suggestions regarding leverage and data collection. A separate statement by SEC Chairman Mary Jo White noted that many of the FSOC’s initiatives fall beyond the SEC's jurisdiction.