Securities and Exchange Commission Chairman Mary Jo White said Thursday the commission is laying down the foundation for stiffer oversight of risks in portfolio composition and operations of investment advisors and funds.
In a prepared speech to a New York Times conference, White said the SEC is considering mandating advisors to give the agency more information on separately managed accounts to aid the agency in establishing exam priorities and to better assess risk.
Another among the increase controls she detailed is the possibility of requiring broad risk management programs for mutual funds and exchange traded funds for liquidity and derivatives.
White warned faulty liquidity management and derivatives use by the funds could put the nation’s financial system at risk.
She praised the Financial Stability Oversight Council’s examination of systemic risk in asset management as complementary to the SEC’s efforts to reign in potentially dangerous practices of the industry.
She said SEC staffers developing a recommendation to require investment advisors to create transition plans to prepare for a major disruption in their business.
White said her plan consists of three parts. The first calls for enhancing the kinds of data the SEC collects from funds and advisers so that the agency can get a better window into industry trends and potential problems.
A second measure will require mutual funds and exchange-traded funds to beef up their internal risk controls, particularly risks surrounding liquidity and the use of derivatives.
The third measure would call for firms to come up with a plan in the event they must unwind and transfer their clients' assets to another fund company.
Reuters contributed to this story.