The U.S. Securities and Exchange Commission has named David Grim to lead the agency’s effort to tighten mutual-fund rules at a time when regulators are studying whether the largest fund companies pose systemic risk.
Grim, 45, will take the helm at the SEC’s investment management division as the unit scrambles to draft five rules including ones governing how funds manage risk posed by holdings of hard-to-sell assets and derivatives. The work is being done as the Financial Stability Board, a group of regulators from around the world, examines whether funds managed by firms such as BlackRock Inc. and Fidelity Investments should face stricter oversight typically reserved for the biggest banks and insurers.
“He’s just extraordinarily knowledgeable and very well positioned to advance that rule-making agenda,” SEC Chair Mary Jo White said in an interview Friday after speaking at an Investment Company Institute event where she announced Grim’s appointment.
U.S. banking regulators and the International Monetary Fund have questioned whether the SEC’s rules for mutual funds and asset managers are sufficient. Funds that have crowded into less liquid assets, such as bank loans or junk bonds, might have to sell investments at a loss to raise cash to meet redemption requests, they say. The industry says mutual funds don’t pose a systemic risk and have lobbied aggressively for their traditional regulator, the SEC, to write any new rules.
The SEC is making “great progress” on the new rules, some of which will be proposed this year, White said. Grim, who has been acting director of the investment management unit since February, also will be involved in representing the SEC before the Financial Stability Oversight Council, the panel of U.S. regulators that determines which financial firms pose systemic risk.
“He’s the guy to get these rules done,” said Norm Champ, who stepped down as investment management director in January. “The other federal regulators all know him, and that’s important right now.”