Finadium Suggests Ways to Improve Securities Lending Transparency

Last month, U.S. Securities and Exchange Commissioner (SEC) Mary Jo White spoke at a New York Times conference, “Enhancing Risk Monitoring and Regulatory Safeguards for the Asset Management Industry,” and Finadium, through its news content site, Securities Finance Monitor, has now made some recommendations on how the SEC can turn some of White's concerns into better oversight of securities lending.
By Jake Safane(2147484770)
Last month, U.S. Securities and Exchange Commissioner (SEC) Mary Jo White spoke at a New York Times conference, “Enhancing Risk Monitoring and Regulatory Safeguards for the Asset Management Industry,” and Finadium, through its news content site, Securities Finance Monitor, has now made some recommendations on how the SEC can turn some of White’s concerns into better oversight of securities lending.

In White’s speech, in addition to discussing changes such as implementing stress testing for large funds, she also spoke about improving the data collected in order to draw conclusions about risk, noting that the agency does not “receive the most complete information about securities lending by funds.”

In Finadium’s view, there should be quarterly reporting of derivatives and securities lending holdings, and related collateral information, in the style of Form N-Q, which is used by investment companies to disclose portfolio holdings.

Finadium would also like to see funds disclose securities lending fees in order to evaluate risk/return in more timely fashion.

While the SEC examines securities lending transparency, Finadium thinks the opportunity also exists to change the rules to allow mutual funds to accept a broader range of non-cash collateral, as they agency can modernize the rules in one fell swoop rather than a piece at a time.

While White’s speech may signal change is on the horizon, Finadium points out that the SEC held a roundtable on securities lending transparency back in 2009, yet the agency still has not issued new requirements on this front. So at this point, securities lending transparency remains a topic of discussion, but not necessarily a call to action.

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