The SEC will consider ways to increase diversity and inclusion in the asset management industry, and whether disclosure and naming rules need to be updated for funds promoting themselves as sustainable, SEC Chairman Gary Gensler told an industry advisory committee Wednesday.
"The asset management industry has a lot of work to do to increase racial and gender diversity," SEC Chairman Gary Gensler said before a meeting of the Asset Management Advisory Committee, which unanimously approved several recommendations on diversity and inclusion.
Mr. Gensler said he has asked SEC staff to consider ways to improve transparency into the industry's diversity and inclusion practices, a top recommendation of the subcommittee on diversity and inclusion. That could include requiring disclosure of aggregated demographic information about an adviser's employees and owners, or an adviser's diversity and inclusion practices as it selects other advisers, he said.
According to that diversity and inclusion panel's report, 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 "remains startlingly and disproportionately low, by any and every objective measure."
The panel recommended three major steps to start addressing the imbalances. The first calls for enhanced disclosure in SEC filings by registered investment advisers on the racial diversity of their workforce, officers and owners. Another proposed step would have similar requirements for fund boards.
Consultants who recommend investment advisers and investment funds would also be subject to enhanced diversity disclosure, if the SEC acts on the recommendations, which also call for enhanced focus by SEC examiners on whether consultants' conflict-of-interest disclosure is adequate.
The panel also recommended that SEC staff study pay-to-play practices, after its research "raised some interesting inquiries regarding the link between diversity and inclusion work and the pay-to-play rules."
A final recommendation calls 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.
"It's all about transparency. There hasn't been enough," said subcommittee co-leader Gilbert A. Garcia, managing partner of Garcia Hamilton Associates, in an interview. "All we are asking is to just make sure that small firms, women and minority managers are not at a disadvantage."
