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Mutual Fund Rules Under Development to Address Risk in Asset Management

As the FSOC continues its focus on the asset management industry – potentially changing its focus from individual asset management to the activities and products offered by asset managements – the SEC is working on proposing rules targeting the asset management industry, according to an article from the Wall Street Journal. The article notes the Commission’s concern about the use of derivatives in mutual funds and the rise of funds employing alternative strategies. The article reports that the rules under development would require additional portfolio-level and risk reporting as well as stress testing to give the Commission the ability to better assess the industry. However, the article notes that the Commission is not considering capital reserve requirements. The Commission reportedly is considering limiting the use of derivatives and strengthening internal policies addressing risk management. The Commission may also be considering requiring funds to have living-will type documents detailing how funds would be wound down in the event of insolvency.