[This story previously appeared in Securities Regulation Daily.]
By Jacquelyn Lumb
SEC Chair Mary Jo White signaled her support for enhancing the transparency of the Financial Stability Oversight Council’s process for considering nonbank financial companies for potential designation as systemically important. At today’s FSOC meeting, the staff reported that, based on wide ranging discussions with numerous parties, including three companies under consideration for designation, three main themes were apparent. Companies want to know sooner if they are being considered for designation as systemically important. They want more information about FSOC’s designation process, and they would like more details about the annual reviews and to be given the opportunity to meet and discuss developments during the reviews.
The staff recommended that if a company publicly announces that it is under consideration by FSOC for a systemically important designation, FSOC should confirm it. Once designated, companies should have an opportunity for more interaction with FSOC during the annual reviews. If a company is considered for designation but then not advanced, the staff recommended that it be notified in writing. If the designation process advances to the final stage, FSOC should grant any request for an oral argument. FSOC should let companies know as quickly as possible where they stand.
During the annual reviews of designated companies, FSOC should let the companies discuss the scope of the review and any relevant changes. A company should be able to contest its designation every five years before the full Council. FSOC would then vote and notify the company of its decision.
Treasury Secretary Jacob Lew noted that FSOC is a young organization. He said it is important that FSOC be nimble and adjust its processes as the organization grows and matures. He strongly supports the staff recommendations and said he would move expeditiously to bring them to a final decision.