Hedge-fund and mutual-fund firms will face scrutiny of their risk-management practices in a meeting today with the top U.S. derivatives regulator.

The Commodity Futures Trading Commission staff is scheduled to meet in Washington to discuss funds’ controls for risks tied the firms’ investments and operations, as well as to regulations. The CFTC regulates futures markets and has been expanding oversight of the swaps market under the 2010 Dodd- Frank Act financial-regulation law.

The discussion is the latest step by regulators to increase oversight of asset managers. The U.S. Financial Stability Oversight Council, which includes the heads of the Federal Reserve and Securities and Exchange Commission, is studying whether New York-based BlackRock Inc. and Boston’s Fidelity Investments should be designated systemically important financial institutions.

The designation could lead to tighter capital, leverage and liquidity rules similar to those faced by banks.

U.S. mutual funds and their Washington lobbying association, the Investment Company Institute, have resisted the designation. Applying the designation to a few large fund companies would hurt competition and fund investors, they say.

“The consequences of SIFI designation could significantly impair fund investing,” ICI’s president Paul Schott Stevens said yesterday at a conference in Orlando.

SEC PLANS

The SEC is also drafting a plan for expanding stress testing of mutual funds and other asset managers and requiring more frequent reporting of mutual funds’ holdings, SEC officials have said. The agency sent guidance to asset managers in January to suggest ways of improving risk-management standards at mutual and exchange-traded funds during periods of volatility in bond markets.

Meanwhile, the National Futures Association, the industry self-regulatory organization, is soliciting comment on possible regulations for asset managers. The NFA said Jan. 23 that it is reviewing the regulatory structure for funds and asked the industry if funds should face regulations for minimum capital requirements.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.