AMAC Subcommittee Recommends Disclosure on Fund Board Diversity

At the recent meeting of the SEC’s Asset Management Advisory Committee, a number of recommendations were put forward on issues such as ESG and DE&I, along with a report on retail investments in private equity. The Subcommittee on Diversity and Inclusion presented its report and recommendations, one of which called for registered fund firms to make disclosures regarding fund board and fund adviser diversity. The subcommittee recommended that “the Commission require enhanced disclosure in SEC filings for investment companies required to be registered under the Investment Company Act of 1940 (particularly, Form N-1A), to provide transparency on gender and racial diversity on the fund board(s) of each fund, as well as issues of gender and racial diversity in the workforce, officer ranks, and ownership ranks of advisory and subadvisory firms employed by each investment company registrant.” The subcommittee called for the disclosures and other measures, stating that transparency is a key step in improving the diversity and inclusion practices of the asset management industry. SEC Chairman Gary Gensler praised the work of the subcommittee and said he has asked SEC staff to consider ways the Commission can enhance such transparency. Gensler listed possible actions the agency might consider, including requiring disclosure of aggregated demographic information about an adviser’s employees and owners, and information about an adviser’s diversity and inclusion practices in its selection of other advisers. Commissioner Hester Peirce urged caution on the subcommittee’s recommendations, raising a number of practical issues such as how the SEC should define diversity and how the agency could verify the accuracy of firms’ statements regarding the racial, ethnic, and gender make-up of firms.