Regulators tout DEI progress, look to pass on lessons

Asset managers, at the request of institutional investors and regulators, have been creating positions and recruiting employees dedicated to improving diversity, equity and inclusion and sharing data about their hiring. But the financial services industry still needs to create more of those jobs to accelerate progress, said Pamela Gibbs, director of the Office of Minority and Women Inclusion at the SEC, during a panel discussion hosted by the Securities Industry and Financial Markets Association in New York on Sept. 21.

The SEC and Ms. Gibbs have set an example for other organizations. By making DEI part of the SEC's structure and supporting progress with data, the regulator has shown that impact of codifying DEI positions irrefutable, according to Sarah Maynard, the London-based global head of external inclusion and diversity strategies and programs at the CFA Institute.

"I think what she's done is absolutely fundamental," Ms. Maynard said about Ms. Gibbs in an interview. "We really have to be ready to think about these concepts as just good people management."

During the panel, Ms. Gibbs proudly stated that the SEC embraces diversity, equity and inclusion and that people at the agency "understand the words and want to support the cause." Although, the progress at the SEC has been years in the making and codifying a position like hers was necessary to foster meaningful change at the regulator, according to Ms. Gibbs.

When the Dodd-Frank Act was signed into law in 2010 after the financial crisis to protect investors, it also created the Office of Minority and Women Inclusion at the Securities and Exchange Commission and since then it has made progress toward becoming a more diverse, equitable and inclusive place.

In 2012, the office submitted a mandatory, five-page report revealing that the SEC ended the previous year with 3,826 employees and that 48.1% were women and 31.5% were minorities. Ten years later, the same annual report has grown to more than 40 pages of details and it showed that in 2021, women accounted for a smaller percentage (46.2%) of the SEC's workforce but that Black, Asian and Hispanic or Latino workers accounted for 34.7%. That makes the SEC slightly more diverse than the U.S. labor force, which was 77% white, 13% Black and 6% Asian in 2020, according to the most recent data from the Bureau of Labor Statistics. Hispanics and Latinos made up 18%, with nearly 90% of that labor force classified under white, according to the BLS.

Out of all professionals working as financial and investment analysts in 2021, 64.4% of workers were white, 20.7% were Asian, 13.1% were Black and 10.7% were Hispanic or Latino, according to the Bureau of Labor Statistics. (The sum of the percentages do not total 100% because they are estimates and data are not presented for all races. People identified as Hispanic or Latino may be of any race.) Women made up 40.2% of workers.

Ownership of the companies hired by the SEC became much more diverse over the past decade. The SEC paid $223 million to contractors in 2010 and 10% was paid to minority-owned businesses and 12% went to women-owned businesses. In 2021, the SEC paid $503.8 million to contractors, of which 36.2% was paid to minority- and women-owned businesses.

The non-partisan, non-profit organization Partnership for Public Service ranked the SEC the fourth-best place to work among government agencies in 2021, up from 24th in a 2010 ranking, based on employee surveys.

The SEC has also created initiatives, programming and training, including the UnCovering Task Force, whose mission is to identify and implement strategies to "ensure that employees are comfortable bringing their authentic selves to work, thereby helping them reach their highest potential." The SEC has also held Diversity Dialogues, small group discussions to provide a safe space where employees can candidly discuss sensitive issues surrounding race. Hundreds of SEC employees have participated in those two programs alone, according to the regulator.

Supervisors and managers at the SEC, groups the regulator is especially focusing on, have become more diverse in recent years. From 2019 to 2021, the number of supervisors and managers who were women fell 4.4% to 359, the number of those who were white fell -0.9% to 666, the number of Black managers rose 12.7% to 89, Hispanic grew 9.1% to 48, and the number of Asian managers and supervisors was up 7.4% to 101.

In 2021, minorities held 19.4% of senior officer positions at the SEC, up from 16% in 2020.

Asset managers are increasingly making diversity a priority, but those and other financial services organizations should still consider creating positions dedicated to DEI, according to Ms. Gibbs.

At least one other regulator looked to the SEC as inspiration. In January, Tanisha Cole Edmonds, who participated in the SIFMA panel with Ms. Gibbs, became the first chief diversity officer at the Commodity Futures Trading Commission. She'll report directly to Rostin Behnam, chairman of the CFTC, who said in a statement that "hiring data shows the CFTC continues to fall short on this critical commitment, specifically when it comes to management level job opportunities. This may be undermining the success of the agency and its individual employees, and it needs to change."

When asked at SIFMA's Diversity, Equity & Inclusion Leadership Summit what "elephant in the room" related to DEI still needs to be addressed by regulators and financial services organizations, Ms. Edmonds said it was equity.

Recruiting certain candidates to a regulator or financial services firm is only the first step in making it more diverse. If a workplace doesn't feel equitable or inclusive, the employees recruited there won't stay, she added.

"All of these things fit together," CFA Institute's Ms. Maynard said in an interview. "Belonging really counts."

To Ms. Gibbs, unconscious bias was her elephant that is impossible to ignore. Organizations and colleagues might unknowingly be creating an unwelcoming environment for certain employees, she said.

"There is an irony in the investment industry in the struggle of unconscious bias," Ms. Maynard said. "These should be conversions that are very normal" given the efforts to remove that influence from investment decisions.