July 6 (Reuters) – Mutual fund boards would be required to disclose information about the gender diversity and racial diversity of their directors under a rule change recommended to the leading U.S. securities regulator.
The suggestion for an advisory subcommittee of the U.S. Securities and Exchange Commission, which would require additional approval, goes further than members of the subcommittee pointed out in the spring and reflects the growing attention of other circles on the lack of diversity in the financial sector.
At present, there is “virtually no representation of women and minorities” on the boards of directors that set the policies of the US $ 29.3 trillion mutual fund industry, Gilbert Garcia, chairman of the subcommittee and managing partner of a Houston investment firm, said in an interview on Monday.
Garcia said the subcommittee didn’t have a specific set of disclosures in mind, but said in general, more data should lead to more diversity. “The theory is that by being transparent about this, market forces will change the makeup” of boards, he said.
The push for new information is in line with other measures aimed at showing the lack of representation of women and minorities in many areas of American business. A new Illinois law requires public companies headquartered in the state to disclose the race and gender of each director, for example. Read more
Fund boards are separate from the directors who run publicly traded asset management firms like BlackRock Inc (BLK.N) or T. Rowe Price Group (TROW.O), and are traditionally less overseen by the public. Fund councils oversee areas such as the fees that funds pay to managers and their performance.
Garcia had said on March 19 that the subcommittee would likely recommend other changes, including that investment advisers report on the race and gender of officers. Read more
The idea remains among the official recommendations the subcommittee made to the SEC’s asset management advisory committee ahead of its Wednesday meeting, according to a report from the subcommittee.
Other recommendations include calls for demographic details on the workforce of fund companies, new SEC guidelines on how asset managers are chosen, and a study on how the rules for political input. could influence asset allocation to the detriment of small businesses owned by women and minorities.
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Gary Gensler, the SEC chairman appointed by US President Joe Biden this year, told a conference last month that he asked staff to come up with details on “human capital disclosure” which could include information on diversity and other demographics of the workforce. Read more
Skeptics fear Gensler and other officials will pass difficult-to-enforce regulations in areas other than traditional finance. Beyond social issues such as board diversity, these include climate change considerations and executive compensation measures. Read more
Speaking on Tuesday at a panel hosted by the conservative Competitive Enterprise Institute that was webcast, Jennifer Schulp, director of financial regulatory studies at the Cato Institute think tank in Washington, said that the SEC could act too quickly or overstep its mandate.
“We’re going to suffer from the rush here,” she said.
A February survey by the Investment Company Institute, a fund industry trade group, and the affiliated Board of Independent Directors found that women make up 30% of all independent fund directors and that racial minorities represent 11%, although both figures increased significantly among independent directors who were appointed and started serving in 2019.
When asked about the subcommittee’s recommendations, Thomas Kim, chief executive of IDC, said in an emailed statement that he has a diversity and inclusion task force “committed to taking action. concrete measures to foster a more diverse and inclusive community of fund managers. We also look forward to working with other industry players, including the SEC, on this important issue. “
Reporting by Ross Kerber in Boston Editing by Matthew Lewis
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