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Statement at the IDC Conference and Governing Council meeting

Oct. 22, 2020


Good morning. Thank you, Jon [Zeschin] for the kind introduction, and thank you for inviting me to speak with you. It is a pleasure to join the funds directors’ community today at this conference as I have done over the past three years. Though the virtual posture we are meeting in this year is a different experience, I welcome the opportunity to share insight on the Division’s work with you. In particular, I would like to focus my remarks today on our outreach initiatives.

Before I begin, however, let me remind you that I am speaking today only for myself and not for the Commission, the Commissioners, or the staff.[1]

Since the beginning of my tenure as Director of the Division, I have been focused on ways to engage with the constantly evolving asset management industry. For example, through the fund board outreach initiative launched three years ago, the staff and I had the opportunity to meet with many of you, to hear your perspectives, and to understand what you see as the key opportunities and challenges in your oversight role.

Dialogue and outreach with a broad array of industry stakeholders is critical to the Division’s work. I believe this approach allows the staff to support healthy innovation and to react appropriately to market developments. I would like to illustrate this by highlighting two other Division outreach initiatives: the staff’s outreach to smaller fund sponsors and to market participants during the COVID-19 market disruption.

Smaller Funds Outreach initiative

New entrants and the success of smaller providers are essential for an industry to innovate. The ability of small and mid-size fund sponsors and other advisers to enter into and compete within the asset management industry is important to provide investors with more choices to meet their financial goals. To this end, last year we launched our smaller fund outreach initiative. Through this initiative, the staff is focusing on better understanding regulatory compliance costs and barriers smaller and mid-size fund sponsors encounter and to begin thinking about ways we could address them, without sacrificing investor protection. I recognize, however, that many of the forces shaping investment markets today are not regulatory or even unique to asset management.

To date, we met about 40 smaller fund sponsors and other investment advisers. These conversations provided valuable feedback on possible improvements to help them engage with us more effectively and to increase their own efficiency in complying with regulatory changes. Our outreach efforts are already paying off. We have heard feedback from smaller fund sponsors that they feel more comfortable than ever simply picking up the phone or sending an email to arrange a quick meeting to discuss policy views with Division staff.

Through this outreach, the staff also learned that many smaller managers are unable to devote internal personnel or to hire outside counsel to comment on Commission proposals and determine how to comply with new requirements. To address this, the Commission and the staff have implemented several measures. For example, we recommended a feedback form designed to give smaller managers a means of providing comments on Commission rule proposals more easily. We have also taken a fresh look at how we draft the small entity compliance guides that accompany the Commission’s adoption of new rules, to make these a more practical and user-friendly resource.

Response to our outreach was not limited to process and information sharing improvements. Smaller fund sponsors engaged with us on several regulatory frameworks ripe for modernizing to take into consideration market developments and changes in technology. Let me share with you a couple.

First, fund sponsors of all sizes identified challenges during the proxy process for funds as issuers and shared constructive views on how to modernize this regime. In part based on this feedback, the Commission sought public comment on whether a shareholder that submits a mutual fund shareholder proposal should be required to reaffirm the proposal after some passage of time without a shareholder meeting.[2] We have also heard about challenges in meeting the quorum requirements under the Investment Company Act, including how the costs of soliciting shareholders particularly impact smaller funds. Fund sponsors have suggested ways to reduce the length and complexity of disclosure in proxy materials without sacrificing the quality of the information that shareholders receive. As we continue to work on possible policy recommendations, we will be focusing on ways to encourage voter engagement and promote shareholder protections while reducing burdens.

Second, smaller fund sponsors noted several rules that they believe would benefit from modernization. One area is the Advisers Act advertising and cash solicitation rules, which the Commission proposed to address last year. Another area is the Advisers Act custody rules, and the Division has taken up this suggestion. Specifically, in response to feedback we received, we are evaluating investment advisory practices that put client assets at risk and tailored safeguards that may better address those risks than what is required under the current rule. Questions we are exploring include the scope of the rule, the surprise examination requirements, and the appropriate role and requirements for qualified custodians.

There are also other areas that I believe need modernizing, such as the custody rules under the Investment Company Act. We are considering whether surgical or broader changes to that set of rules might be warranted. The staff is fully aware that these and other rules could benefit from modernization and we would appreciate input on how they could be improved.

COVID-19 Market Disruption

Let’s move to the COVID-19 market disruption, which was also illustrative of the Division’s outreach strategy. The Division’s response included recommendations to the Commission for targeted, temporary relief addressing filing and delivery challenges, providing additional tools for obtaining credit, and permitting fund boards to meet virtually. The staff also responded to a variety of questions, including in staff letters and FAQs.[3] None of these actions were taken in a vacuum.

The Division approached this year’s market disruption in a fundamentally different position with regard to data compared to the 2008 financial crisis. Our Analytics Office includes examiners, industry experts and financial analysts, allowing for targeted engagement and more detailed analysis of the extensive data we receive from registered fund and adviser reporting. Our experts’ knowledge base covers key areas such as ERISA, ETFs, MMFs, operations, portfolio management, and private funds. [4] We now have the ability to identify exposures and target outreach based on informative data sets. Since March, our Analytics Office has engaged in extensive industry outreach and monitoring to gather critical information that then informed the Division’s policy recommendations that I mentioned earlier. Going forward, we will continue to focus on broadening our ability to monitor trends and risks, analyze data collections, and formulate data informed policy decisions.

I also encourage you to consider your own experiences during this latest market disruption and engage with us in an open dialogue. We would be very interested in hearing from you about what aspects of the regulations and operations worked well and where improvements are needed. For example, do you have suggestions on how to improve regulation to help money market funds weather market disruptions more smoothly? What are your views on how bond funds and the underlying markets functioned?


Again, I appreciate the opportunity to be (virtually) with you today and as we all assess the impact on the industry and the markets of recent events, I look forward to further the constructive dialogue we have started.

[1] The Securities and Exchange Commission (“SEC” or “Commission”) disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.

[2] See Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8, Question No. 15 on page 28, available at

[3] A summary of the COVID-19 emergency relief and frequently asked questions for investment companies and investment advisers is available at

[4] Thank you to our Analytics Office team: Timothy Husson, Jon Hertzke, Christian Broadbent, Kathy Churko, Tim Dulaney, Laura Hatch, Kenneth O’Connor, Luis Casais, Lauren Sprague Hamill, Ivy Huo, Isaac Kuznits, Sankar Nair, Deepak Pai, Jacquelyn Rivas, Trevor Tatum, Kevin Treharne, Michelle Trillhaase, and Guang Yang including our industry specialists, Viktoria Baklanova, Holly Miller, Roberta Ufford, David Stevens, and Joshua Weinberg.

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