FSR: SEC should use objective criteria to assess liquidity risk of funds

FSR: SEC should use objective criteria to assess liquidity risk of funds

WASHINGTON, DC - This is a news release from FSR

The Financial Services Roundtable (FSR) sent a letter to the Securities and Exchange Commission (SEC) responding to a proposal that would require open-end funds to implement formal liquidity risk management programs.

"FSR believes the SEC has taken an important step to address potential systemic risks that may impact the asset management industry," said Felicia Smith, Vice President and Senior Counsel for Regulatory Affairs.

FSR supports the SEC's efforts to promote effective liquidity risk management throughout the industry, and provide important protections to investors in normal and stressed markets.  FSR agrees with the SEC that funds and their advisers should assess and periodically review their liquidity risk.

However, FSR believes the SEC could better achieve its goals through a principles-based alternative to the proposal, which would allow firms to develop their own liquidity risk management programs specific to their individual business models.  This move would ensure that a fund's liquidity risk calculation is more accurate.

FSR also recommends using objective rather than subjective criteria for assessing the liquidity of the funds' securities holdings. As a result, there would be a greater degree of transparency and comparability among funds, making information more useful to investors.