Draft Bill Calls for Diversity Considerations in Hiring of Subadvisers
At recent Capitol Hill hearings lawmakers discussed diversity in the financial services industry and the need to improve representation from more diverse groups, particularly in banking, and released a multimedia report entitled, “Diversity and Inclusion: Holding America’ Large Banks Accountable,” as part of an effort to hold financial institutions accountable and inform the public on how large banks are meeting their commitments to diversity. A House Financial Services subcommittee also held hearings on diverse asset managers to highlight the challenges they face. Experts and lawmakers discussed legislation aimed at promoting the increased consideration of diverse asset management firms by requiring companies registered with the SEC to consider at least one diverse asset manager when contracting out for investment advisor services and reporting to the agency. The “Diverse Investment Advisers Act” is still in the draft stage and there is not yet any indication how much progress it will make through Congress. The major industry trade groups are monitoring the bill. Industry participants believe the draft bill would not affect the 15(c) advisory contract renewal process for boards of mutual funds, however the draft bill likely could apply to the hiring of unaffiliated subadvisers when a shareholder vote is not required. At the Capitol Hill hearings, the house subcommittee reported that although women and minority-owned firms account for approximately 8.6 percent of the asset management industry, recent reports show that they only manage 1.1 percent of all assets under management or $785 billion out of $71.4 trillion and are underrepresented as managers in every asset class.