Under heavy pressure from the FRB, FSOC, and global regulators to address what they see as systemic risk in the fund-management arena, the SEC is proposing a series of new disclosures designed to provide regulators with more information on fund risk for prudential purposes, and to give investors better data on which to make their decisions. The new data requirements are extensive and will prove quite expensive for funds as they restructure their data gathering, aggregation, and reporting systems. However, new information—e.g., counterparty names and exposures—could also have considerable regulatory and business consequences, as could detailed portfolio disclosures that might facilitate front-running or even free-riding practices by investors seeking to avoid the cost of active fund management. Many other disclosures—e.g., refund derivatives holdings, leverage, and liquidity—could lead both to SEC supervisory intervention or broader regulatory action by the Commission or bank supervisors. Securities financing may be particularly targeted since new disclosures will give the Commission considerably more information on risks taken in this critical arena.

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