Thomas P. Vartanian, Chair of Dechert’s Financial Institutions practice, responded to the U.S. Securities and Exchange Commission's (SEC) request for comments, on behalf of certain clients, by comprehensively criticizing the methodology, operating predicates and lack of factual or legal support for the Office of Financial Research’s Report on Asset Management and Financial Stability (Report).
Dechert’s letter lays out a series of fundamental legal and logical defects in the Report:
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It fails to appreciate the fundamental differences between the role played by asset managers as agents for investors and balance sheet companies that act as principals.
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It simplistically homogenizes a diverse asset management industry and discusses very different investment vehicles, structures and investment strategies in a one-size-fits-all manner.
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Its implications regarding risks that may be associated with floating net asset value mutual funds are unsupported by empirical evidence or models.
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It does not properly consider the critical role of SEC regulation.
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It does not provide the foundation for informed discussions of asset management entities, activities or markets, let alone a valid legal or logical basis for regulatory action.
