(Bloomberg) -- BlackRock Inc. and Fidelity Investments will be studied by U.S. regulators who are in the early stages of reviewing whether asset managers pose a potential risk to the financial system, two people with knowledge of the matter said.

The Financial Stability Oversight Council’s discussion Oct. 31 and agreement to review New York-based BlackRock and Boston- based Fidelity don’t necessarily mean the companies will be designated systemically important by the council, according to the people, who requested anonymity because the meeting was closed to the public. The panel didn’t take any formal action regarding the companies.

FSOC’s preliminary talks may presage months of wrangling between the industry and officials charged with trying to prevent a repeat of the 2008 financial crisis. Asset managers are among non-bank financial companies that the council is empowered by law to evaluate to determine whether their failure could threaten the entire system and thus require Federal Reserve oversight. BlackRock, Fidelity and the mutual-fund industry’s trade group have said money managers aren’t a threat.

“We continue to believe that the asset-management industry, and mutual funds in particular, do not present the types of risk that the FSOC was designed to address,” Vincent Loporchio, a spokesman for Fidelity, said in an e-mail in response to a question about the FSOC meeting. BlackRock spokesman Brian Beades said the company “doesn’t comment on rumor or speculation.”

‘Initial Discussion’

Treasury Secretary Jacob J. Lew is the council’s chairman. Treasury spokeswoman Suzanne Elio declined to comment. In a statement after last week’s meeting, Elio said the council “held an initial discussion on asset management,” and she didn’t identify any companies. The FSOC’s rules state that it doesn’t intend to disclose names of firms before “a final determination.”

The oversight council is authorized under the Dodd-Frank Act of 2010 to identify companies that could threaten stability. The Fed can impose on those firms tighter capital, leverage and liquidity rules, and demand measures including stress testing for crisis scenarios and plans for winding them down should they start to fail. The council includes Fed Chairman Ben S. Bernanke and Securities and Exchange Commission Chairman Mary Jo White.

The council’s discussion follows a study by the Treasury Department’s Office of Financial Research on the asset- management industry. Money managers could endanger the financial system when reaching for higher returns, herding into popular asset classes or amplifying price movements with leverage, the office said in its Sept. 30 report, which was conducted to help the FSOC analyze asset managers.

Three Designations

In the three years since its formation, FSOC has designated three non-banks as systemically important financial institutions, or SIFIs: Insurer American International Group Inc., General Electric Co.’s finance unit and Prudential Financial Inc. Analyzing asset managers could be even more complicated because the money they manage for clients isn’t on their own balance sheets.

Unlike large banks, including Citigroup Inc. and Bank of America Corp., no large asset manager required a taxpayer bailout in the aftermath of the financial crisis.

“It is easily forgotten” that assets under management represent “client assets, not firm assets, obscuring the fact that at the firm level, asset managers have no impact on systemic risk,” Barbara Novick, BlackRock’s vice chairman, wrote in a comment letter about the OFR report submitted Nov. 1 to the SEC.

Products, Practices

“We believe that the OFR study did not establish that there is any evidence to link the size of the asset manager to the risks posed by those products and practices which we agree present potential risk,” Novick wrote.

BlackRock, the world’s largest money manager, had $3.8 trillion in assets under management at the end of last year, according to data compiled by Bloomberg. Fidelity, the fifth largest in the U.S., had $1.7 trillion.

Last week the SEC received letters from the U.S. Chamber of Commerce and financial companies, including Fidelity and T. Rowe Price Group Inc., criticizing the OFR study. Better Markets, a Washington-based advocacy group that has lobbied for tighter financial rules, said the report had “glaring deficiencies.”

Reviews Research

The financial research office, part of the Treasury Department, was created by Dodd-Frank to improve the quality of financial data for regulators. In developing the asset management study, OFR staff “reviewed existing research, analyzed industry data, interviewed market participants, and consulted extensively with council member agencies,” the Treasury said when the study was released in September.

“I would be somewhat surprised if they rush off to designate a lot of other companies in the short term,” said Satish Kini, a partner at Debevoise & Plimpton LLP in Washington. The Fed “is likely going to have its hands full thinking about how it wants to tailor the various rules for designated companies and how it wants to supervise them.”

The asset-management study “indicates that the FSOC may not be willing to give asset managers a complete pass from any consideration, but I don’t think it necessarily means they’re going to designate any asset managers in the near term,” Kini said.

Focused Regulation

Some large firms are concerned that they may face new rules that would hurt their competitiveness, according to three industry executives who asked not to be named because they weren’t authorized to speak publicly. Managers want the SEC to address any systemic threats with regulation focused on certain activities, rather than impose company-specific restrictions or obligations, the executives said last month.

The FSOC uses thresholds in areas including assets and leverage ratio to help it determine which companies it should analyze. Companies go through three stages before the council takes a preliminary vote to designate, which can be challenged by the firm. The council has said it might develop additional guidelines for decisions regarding asset managers.

“Any FSOC discussion of designating individual asset managers as SIFIs would be premature and inappropriate at this time,” Paul Schott Stevens, president of the Investment Company Institute, said in an e-mailed statement. “The recent OFR study fell far short of providing the analysis and guidance that FSOC sought and would need as a predicate for any such discussion.”

The Washington-based ICI is a trade group representing the mutual-fund industry.

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