Robert Raben, executive director and founder of the Diverse Asset Managers Initiative, a consortium of financial services professionals, institutional investors, corporate and philanthropic board members and trade associations that aims to boost the number of diverse-owned asset management firms and increase their assets under management, welcomed the SEC guidance in a statement, but said the diversity gap in the asset management industry is bleak.
"We appreciate the guidance provided by the SEC for the intentional incorporation of diversity, equity and inclusion within entities seeking investment advisers — any and all efforts to facilitate such long overdue change should be applauded," Mr. Raben said. "It is, however, tough to admit that the opposition to women and people of color in asset management is so stark that the premier regulatory agency was compelled to put out guidance that it's OK to work with them."
The guidance Wednesday is in response to recommendations on diversity and inclusion made unanimously in July 2021 by the SEC's Asset Management Advisory Committee. The committee's recommendations also included requiring enhanced disclosure in SEC filings by registered investment advisers on the racial diversity of their workforce, officers and owners; directing SEC staff to study the influence of political contributions on asset allocation in the institutional market and to clarify that a wide variety of factors may be considered by fiduciaries in their selection of asset management firms; and for the SEC to set up a formal process for managing complaints of discriminatory practices in the asset management industry, including employment and independent contracting.
Sen. Robert Menendez, D-N.J., who led a group of 22 Democratic senators in sending a letter to SEC Chairman Gary Gensler in October 2021 urging the SEC to adopt the committee's recommendations, pressed Mr. Gensler on the issue during a Senate Banking Committee hearing in September.
"I appreciate that you're giving some of these recommendations serious attention, but at the same time I must say that I'm disappointed," Mr. Menendez said to Mr. Gensler during the hearing. "In so many other areas the SEC under your leadership has taken bold steps to protect consumers, to strengthen oversight of markets, such as your proposed climate risk disclosure rule, however, when presented with AMAC's non-controversial, unanimous recommendations that would promote diversity in the asset management field, you haven't been as aggressive."
In a joint statement Thursday, SEC Commissioners Caroline A. Crenshaw and Jaime Lizárraga said that while the staff guidance is "a step in the right direction, we believe all of the recommendations laid out in the AMAC report deserve our prompt consideration."
"We remain committed to working with the chair and our fellow commissioners in considering AMAC's recommendations at the commission level and considering other potential ideas or actions that would help provide transparency on diversity practices, potential biases, and other DEI matters that are proving ever-important to the investing public," the commissioners added.
Less than 1% of $70 trillion in global financial assets are managed by minority-owned or women-owned firms, while among asset management firms, percentages of ownership interests by women and people of color remain "startlingly and disproportionately low, by any and every objective measure," according to an SEC subcommittee on diversity and inclusion report.
