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Advocacy Efforts -- News from the SEC

By Solange Brooks, NAA CEO

The issue of diversity and inclusion in the asset management industry is a priority of the U.S. Securities and Exchange Commission (SEC). Its Asset Management Advisory Committee (AMAC) listened to industry concerns and recommendations to create additional transparency and to increase access to traditionally underrepresented firms, including women- and diverse-owned firms. In July 2020, NAA provided testimony to AMAC on this topic. (Read testimony here).

Further, SEC Chairman, Mr. Gary Gensler, sworn into office on April 2021, reached out to NAA to hear our views, concerns, and recommendations on diversity, inclusion, and ESG. With the legal assistance of our NAA member Linda Igarashi from Sheppard Mullin and Gerson Guzman, past Chairman of NAA Inc., a thoughtfully produced letter with our recommendations and concerns was prepared in January 2022.

After these discussions and recommendations from industry groups, including NAA, on October 2022, the SEC published a FAQ addressing two key recommendations. One of the questions is whether, under its fiduciary duty, an investment adviser may consider factors relating to diversity, equity, and inclusion. The SEC answered YES. An investment adviser is required to have a reasonable belief that the advice it provides is in the best interest of the client based on the client’s objectives. Please read the full answer at the direct link to the FAQ:

Staff FAQ Relating to Investment Adviser Consideration of DEI Factors

Additional recommendations are still under consideration by the SEC. Although this is not a regulation nor a rule, it is particularly good news. It indicates the direction the SEC is leaning and that we were heard. The next step is to make it official. As has been mentioned before, it is a long communication process to be heard by federal officials, but in important matters that impact our NAA members, we have to be relentless.