by 4 minutes Reuters (Reuters) – Under a rule change proposed to the top US securities regulator, mutual fund boards would be forced to provide information on the gender and racial diversity of their directors. FILE PHOTO: U.S. Securities and Exchange Commission Chair Gary Gensler, pictured at a Senate Banking Committee hearing on systemic risk and market monitoring on Capitol Hill in Washington on May 22, 2012, while he was chairman of the Commodity Futures Trading Commission. Jonathan Ernst/REUTERS The proposal from a Securities and Exchange Commission advisory subcommittee, which would require further approval, goes beyond what subcommittee members had proposed in the spring and reflects a rising attention on the financial industry’s lack of diversity from other quarters. In an interview late Monday, Gilbert Garcia, chair of the subcommittee and managing partner of a Houston investment firm, said there is “almost no representation of women and minorities” on the boards that determine rules across the $29.3 trillion US mutual fund industry. Garcia stated that the subcommittee does not have a precise set of disclosures in mind, but that more data should result in greater diversity. He explained that “the notion is that by putting transparency on this, market forces will change the makeup” of boards. The quest for additional data is in line with recent initiatives aimed at highlighting the dearth of female and minority representation in various areas of American industry. A new Illinois law, for example, mandates public firms based in the state to disclose the race and gender of each director. Fund boards are separate from those who oversee publicly traded asset management firms such as BlackRock Inc or T. Rowe Price Group, and they have typically been subjected to less public scrutiny. The fees that funds pay to managers, as well as their performance, are overseen by fund boards. On March 19, Garcia said the subcommittee will likely recommend more reforms, such as requiring investment advisers to report on officials’ color and gender. According to a subcommittee report, that notion is still among the official recommendations the subcommittee has submitted to the SEC’s asset management advisory group ahead of its Wednesday meeting. Other proposals include a study of how political contribution restrictions could impact asset allocation at the detriment of smaller firms owned by women and minorities, new SEC instructions on how asset managers are hired, and a need for demographic statistics on fund firm workforces. At a conference last month, Gary Gensler, the SEC head appointed by US President Joe Biden this year, said he has requested staff to provide “human capital disclosure” statistics, which might include data on diversity and other personnel demographics. Skeptics are concerned that Gensler and other officials would establish difficult-to-enforce restrictions in areas other than traditional finance. Climate change considerations and executive compensation measurements are among them, in addition to societal issues like boardroom diversity. Jennifer Schulp, director of financial regulation studies at the Cato Institute think tank in Washington, said the SEC could move too quickly or overstep its jurisdiction during a discussion hosted by the conservative-leaning Competitive Enterprise Institute on Tuesday, which was webcast. “Here, we’re going to suffer from hurry,” she said. Ross Kerber in Boston contributed to this report. Matthew Lewis edited the piece./n
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