US SEC to review exemption rules for affiliated securities lending programmes
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US SEC to review exemption rules for affiliated securities lending programmes 13 December 2019Washington DC Reporter: Drew Nicol
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The US 网爆吃瓜 and Exchange Commission (SEC) is seeking ways to 鈥渁ddress the divide鈥� that exists between market participants with exemption relief for their affiliated securities lending programmes and those without.
In a keynote address at the 2019 ICI 网爆吃瓜 Law Developments Conference last week, Dalia Blass, director in the SEC鈥檚 division of investment management, described securities lending as a 鈥渃urrent priority鈥� for her division and outlined several ways she plans to update shortcomings in the commission鈥檚 current rules around the involvement of affiliated parties.
Currently, under the Investment Company Act of 1940, funds that pay an affiliated agent with a share of revenue must obtain 鈥榚xemptive relief鈥� from the SEC.
As a result, Blass noted, 鈥渟ome funds have relief and others that would like it do not鈥�.
To rectify this imbalance the division formed a team earlier this year to develop possible solutions and 鈥渃onfront potential conflicts of interest and abuses raised by such arrangements鈥�.
As part of her speech, Blass said she would 鈥渨elcome ideas on qualitative and quantitative conditions鈥� to address these concerns.
Primarily, the division is looking into how asset managers鈥� advisers and boards can consider the appropriateness of their securities lending programme on a fund-by-fund, asset class and complex-wide basis.
Blass went on to question whether the SEC should explore new conditions that require a mix of affiliated and unaffiliated agents, rather than allowing a fund to use an affiliated lending agent for its entire programme.
The commission, Blass theorised, could permit the use of affiliated agents only if limited to a certain percentage of the securities loaned.
The aim of such a change would be to help support competition, transparency and benchmarking.
Moreover, Blass speculated whether advisers and boards have access to independent information about the performance of their securities lending agent and if additional disclosures that would improve the mix of information.
鈥淲e understand the importance of a level playing field in affiliated securities lending,鈥� Blass added. 鈥淎ny constructive input you can provide in this area will help us work toward this goal.鈥�
The SEC's division of investment management was not immediately available to offer information on a timetable for potential reforms to be produced, or specific changes being considered.
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