The Portfolio Management Association of Canada (“PMAC”), through its Industry, Regulation & Tax Committee, is pleased to have the opportunity to comment on the March 4, 2015 consultative document, entitled Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions (the “Second Consultative Document”), published by the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO). Because PMAC’s members are Canadian asset management firms, we have a great interest in the FSB and IOSCO’s proposals on this topic, particularly as it relates to asset managers. Our submission will focus on the investment fund and asset management assessment methodologies included in the Second Consultative Document.
Our Members are of the view that risk among investment funds, and in the asset management industry more broadly, including asset managers, is not concentrated in individual entities, but instead is more a result of market shifts that may impact the industry across sectors due to many (and not one) factors. We agree with the position taken by the Asset Management Group at SIFMA that it would be more productive to assess and regulate “activities” in which investment funds and other capital market participants engage than it would be to try to identify individual entities that represent concentrated risk to such a degree that they warrant different regulation than their competitors. We also agree with the comments made by the Investment Advisor Association (IAA) that a sector-specific methodology for asset managers is unwarranted and support their comments on those aspects of the Second Consultation Document that relate to the proposed methodology for analyzing asset managers.
To the extent regulators determine specific activities or practices in the asset management industry pose risks to the market or to the financial system; domestic regulators should use their rulemaking authority to address those risks through activity-based regulation and not product entity based regulation. We do support the proposed approach to address certain systemically risky practices and activities; we believe there are less targeted regulatory powers that could be used which are not punitive to individual asset managers based on size or some other formula, or products and that do not depend on certain objective and subjective factors. Canadian securities regulators already have the tools required to address excessive risk taking and potential securities laws breaches and have used these tools to improve regulatory oversight over specific sectors. In addition, global regulatory bodies and standard-setting authorities, also has played an active role in facilitating these efforts.