The proposals the MFA highlighted include ones to expand reporting requirements for large hedge funds as well as private equity firms; broaden the "exchange" definition to include systems that trade treasuries and other government securities and require those systems to register as national securities exchanges or as broker-dealers and comply with Regulation ATS for alternative trading systems; and require investment advisers and fund managers to disclose additional information on ESG strategies.
"We believe the sheer number and complexity of the proposals, when considered in their totality, if adopted, would impose staggering aggregate costs, as well as unprecedented operational and other practical challenges, neither of which have been considered by the commission in its proposals to date and neither of which are warranted by such proposals' limited benefits," the MFA said in its letter. "Instead, we believe the aggregate effect of the proposals would be to decrease the efficiency of the markets and, ultimately, to negatively impact the very investors that the commission is attempting to protect."
Industry stakeholders like the MFA have voiced concerns in recent years over the pace of SEC rule-making under Chairman Gary Gensler. Mr. Gensler in testimony last week before Congress defended the SEC's agenda and said the commission during his tenure has finalized 19 rules and has about 55 total rule-making initiatives on its agenda. He noted that his predecessor at the SEC, Jay Clayton, finalized 64 rules over a four-year period.
But Bryan Corbett, MFA president and CEO, said SEC's cost-benefit analysis on the aggregate impact of its rule-making on alternative asset managers is nonexistent.
"The rules are interconnected in ways that the SEC hasn't considered," Mr. Corbett said in a statement. "This creates blind spots that could lead to negative unintended consequences that harm advisers, markets and investors, including pensions, foundations and endowments. For the health of the U.S. Capital markets, the SEC should reevaluate the overall effect of its rule-making before finalizing its proposed rules."
An SEC representative did not immediately respond to a request for comment.