Birdthistle Addresses Technology, Changing Demographics at ICI Conference
In March, William Birdthistle, Division Director of the Commission’s Division of Investment Management, addressed attendees of the ICI’s Investment Management Conference. His remarks focused on three key areas: technological advancement, changing demographics, and rapid growth. Notably, his remarks did not touch on the Commission’s open-end fund rule proposals or climate disclosure proposals pending before the Commission.
In his remarks on increased developments in the tech space, Director Birdthistle noted “the Division has devoted attention to the importance of asset managers’ responsibilities in light of certain technological capabilities, as a complement to more traditional areas of regulatory focus, such as conflicts-of-interest management and effective disclosure.” He noted the Commission’s recent proposal on cybersecurity plans for broker-dealers and other parties as well as the reopening of the comment period for the proposal addressing cybersecurity risk management plans for investment advisers and funds. He added changes to Regulation S-P (another recent proposal from the Commission) would require written policies and procedures for incident response programs at covered entities. He stated “it’s exceedingly important that investors are given notice when their sensitive customer data is compromised so that they can respond and protect themselves.” He also touched on the Commission’s recent custody rule proposal, noting “a responsible regulator must remain current and observant in order to identify and to address gaps in protections because technological advancements can at times be impatient…”
Birdthistle also touched on the impact changing demographics has on the asset management community. He noted the baby boomer generation is approaching or has reached retirement while a new era of investors has reached the marketplace. He noted finalized requirements for annual and semi-annual shareholder reports and the proposed Names Rule amendments would help “modernize” disclosure. Birdthistle also implored entities to submit their own self-assessments, noting that the Office of Minority and Women Inclusion (OMWI) opened a “Diversity Assessment Report” tool to streamline self-assessments and, “just nine percent of the 1,263 entities that OMWI asked to participate in the survey submitted responses.”
Lastly, he touched on the rapid growth in the market overall and the types of products marketed to investors. He noted that with this growth came a deeper dependence on third party service providers. He mentioned the Commission’s recent proposal on oversight of third-party service providers, noting that “clients may benefit from certain efficiencies related to outsourcing in the form of better services or perhaps even lower fees should the adviser decide to pass on any savings to investors.” Birdthistle went on to add, “Although I recognize that outsourcing may be a practical necessity for some advisers and may provide significant benefits to advisers and their clients, the growing prevalence of such arrangements warrants enhanced focus by both advisers and the Commission to ensure that clients receive the benefits and protections afforded by advisers’ fiduciary obligations.”
Click here to read Director Birdthistle’s full speech at the ICI conference.