The Corner

Regulatory Policy

The SEC and Regulatory Creep (Again)

(Jonathan Ernst/Reuters)

The SEC (from 2020):

For more than 85 years since our founding at the height of the Great Depression, we have stayed true to our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.


July 6 (Reuters) – Mutual fund boards would be required to disclose information on the gender and racial diversity of their directors under a rule change recommended to the top U.S. securities regulator.

The suggestion from an advisory subcommittee of the U.S. Securities and Exchange Commission, which would need further approval, goes further than subcommittee members had outlined in the spring and mirrors a growing focus from other quarters on the financial industry’s lack of diversity.

At present, there is “virtually no representation of women and minorities” on the boards that set policies across the $29.3 trillion U.S. mutual fund industry, Gilbert Garcia, chair of the subcommittee and managing partner of a Houston investment firm, said in an interview late on Monday.

Garcia said the subcommittee does not have a specific set of disclosures in mind, but said in general more data should lead to more diversity. “The theory is that by shining transparency on this, market forces will change the makeup” of boards, he said…

Fund boards are distinct from the directors who run publicly traded asset-management businesses like BlackRock Inc or T. Rowe Price Group, and traditionally face less public scrutiny. Fund boards oversee areas like the fees that funds pay to managers and their performance…

Skeptics worry Gensler and other officials will adopt regulations that are hard to enforce on areas outside of traditional finance. Beyond social issues like board room diversity these include climate change considerations and executive pay metrics.

Well, some skeptics may worry about that. Others, however, may be more concerned that the SEC is getting ready to advance a political and social agenda that has nothing to do with its remit, and, what’s more, that the regulatory system is being used as a way of bypassing the democratic process.

For more on the SEC’s redefinition of what it is supposed to be for, here’s Richard Morrison, writing for Capital Matters back in March, and again in May.


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