Dalia Blass to Conclude Tenure as Director of the Division of Investment Management
Under Director Blass’s Leadership, the Division Undertook Numerous Initiatives Benefitting Main Street Investors
Washington D.C., Dec. 22, 2020 —
The Securities and Exchange Commission today announced that Dalia Blass, Director of the Division of Investment Management, will depart the SEC in January after leading the Division since September 2017. Under her leadership, the Division finalized more than 70 regulatory initiatives affecting investment companies and investment advisers.
The Division of Investment Management’s work is critical to ensuring that America’s Main Street investors have access to high-quality investment opportunities from which they can make well-informed investing decisions. It has primary responsibility for administering the Investment Company Act of 1940 and the Investment Advises Act of 1940, which includes overseeing investment companies (e.g., mutual funds, closed-end funds, business development companies, unit investment trusts, variable insurance products, and exchange-traded funds) and investment advisers.
“Both quantitatively and qualitatively, the work advanced by the Division of Investment Management over the last three years is a testament to Dalia’s leadership, extensive experience within the agency, and commitment to America’s investors,” said SEC Chairman Jay Clayton. “In every action, Dalia has made it abundantly clear that her top priority is the interests of our long-term Main Street investors, who often rely on investment products to effectively establish and maintain a diversified investment portfolio. Her experience and deep knowledge of the industry and the federal securities laws have been invaluable as we’ve modernized outdated regulations and navigated a global pandemic, all while seeking to increase the industry’s resiliency and accommodate investor-oriented innovation.”
“It has been the honor of a lifetime to work together with the women and men of Investment Management and the Commission to modernize the existing regulatory framework and find forward-looking solutions that solve not only today’s issues, but anticipate those to come,” said Ms. Blass. “From serving as a member of staff to division director, my time here at the Commission has been one of the most rewarding experiences of my career. Thank you to Chairman Clayton for offering me this incredible opportunity and for his unwavering support of the Division’s priorities and efforts. And thank you to my colleagues for your unparalleled dedication, insight, wisdom and friendship. The SEC is the best place to work because of you.”
Modernizing Asset Management Regulatory Framework
Ms. Blass and Investment Management oversee an industry that continues to grow and innovate at a rapid rate. In 1940, when the key statute regulating the asset management industry was signed into law, the registered fund industry consisted of 105 funds with $1 billion in assets. The Division now regulates more than 14,000 registered funds that hold a combined nearly $27 trillion in assets, as well as more than 13,800 registered advisers with nearly $97 trillion in regulatory assets under management.
As an example of its work to modernize the current framework, Investment Management, under Ms. Blass’s leadership, recommended new rules to the Commission for:
- Exchange-Traded Funds: a consistent, standardized framework for the regulation of the vast majority of ETFs operating today. In addition, the Division recommended that the Commission authorize the first new actively managed ETF models since 2008 that did not publish their portfolio holdings daily.
- Fund of Funds Arrangements: an updated, consistent and comprehensive regulatory framework for fund of funds arrangements with the necessary flexibility for fund managers to allocate and structure investments efficiently, without the costs and delays of seeking individualized exemptive orders.
- Business Development Companies: reforms to modernize the registration, offering and investor communications processes for BDCs and closed-end funds.
- Derivatives: enhanced the regulatory framework for use of derivatives by registered investment companies and BDCs. The new rule provides a modernized, comprehensive approach to the regulation of funds’ derivatives use that addresses investor protection concerns and reflects market developments.
- Fund Fair Valuation Practices: a new rule designed to clarify how fund boards of directors can satisfy their obligations in light of market developments. This Commission last addressed valuation practices over 50 years ago.
- Investment Adviser Marketing: reforms to modernize rules governing adviser advertisements and payments to solicitors. The amendments created a single rule designed to comprehensively and efficiently regulate adviser marketing activities.
As Investment Management worked to modernize the regulatory framework for the asset management industry, it reviewed prior staff statements to consider changes in light of market or other developments. Through this initiative, the staff withdrew outdated letters that addressed advisers’ responsibilities in voting client proxies and retaining proxy firms, and that addressed the intersection between state control share acquisition statutes and the investment company Act’s voting requirements for closed-end funds. The Division also withdrew or recommended the withdrawal of dozens of prior staff statements as the Commission adopted or amended rules to ensure consistent treatment. Further, the Division revisited and revised the historical “Dear CFO” letters, providing updated guidance in light of market developments in fund auditing and accounting practices.
Ms. Blass also led the division in issuing guidance regarding proxy voting responsibilities of investment advisers, including guidance for circumstances where additional information from issuers may become available, investment advisers’ use of a proxy advisory firm’s electronic vote management system and disclosure and client consent obligations when investment advisers use these services for voting.
Improving the Main Street Investor Experience
Understanding that Main Street investors increasingly rely on mutual funds, ETFs and other investment vehicles to meet their financial goals, Ms. Blass and the Investment Management team undertook a significant effort to improve the overall experience for investors. The touchstone of this initiative is the basic principle of effective disclosure – disclosure should help investors make informed investment decisions by providing information in a clear, digestible and well-designed format. The cornerstone of the initiative was modernizing the content, design and delivery of fund regulatory materials. Actions taken by the Commission and the Division as part of this initiative include (1) a new disclosure framework for variable annuity and variable life insurance contracts, which permits the use of concise and reader-friendly summary prospectuses and leverages both technology and layered disclosure to improve the investor’s ability to understand and evaluate the features, fees and risks of these specialized products; and (2) the proposed comprehensive reforms to the disclosure framework for mutual funds and ETFs that would comprehensively update and modernize the design and content of shareholder reports and make uses of advances in technology and design techniques, including by encouraging funds’ use of interactive design features and tools to enable investors to customize information.
As part of this initiative the Division designed an innovative “feedback flyer” to make the agency’s policy discussions accessible to Main Street investors. Through this form, Main Street investors submitted comments on many Division recommendations including on the Form CRS, the variable annuity summary prospectuses, and investment adviser marketing. In addition, Main Street investors used this form in response to the Request for Comment on Fund Retail Investor Experience and Disclosure, which led to the Division’s recommendation on reforms to the disclosure framework for mutual funds, and ETFs.
Elevating Standards of Conduct for Financial Professionals
Ms. Blass led teams from across the Commission, including from Investment Management and Trading and Markets, on the Standards of Conduct rulemaking package. This rulemaking package was designed enhance the quality and transparency of the financial professional-retail relationship and included two overarching objectives: (1) to bring the legal requirements and related mandated disclosures of financial professionals (both broker-dealers and investment advisers) in line with reasonable investor expectations; and (2) to preserve retail investor access (in terms of choice and cost) to a variety of investment services and products. It included Regulation Best Interest, Form CRS Relationship Summary, the Interpretation Regarding the Standard of Conduct for Investment Advisers, and the Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion from the Definition of Investment Advisers. Together, these initiatives are intended to help retail investors find and use important information and empower them when choosing a financial professional or product. Since the adoption of the Standards of Conduct rulemaking package, Ms. Blass and her team have been actively engaged in the implementation of the rules through the Commission’s inter-Divisional Standards of Conduct Implementation Committee.
Navigating the COVID-19 Pandemic
As the global pandemic took hold, Ms. Blass led efforts to protect investors and ensure market integrity as the asset management industry coped with the new challenges. The staff engaged with registrants about the issues they faced adjusting to the pandemic and what regulatory response may be needed, made hundreds of calls across the industry to gain direct insight into ongoing and potential issues, and analyzed data received from registered funds and advisers. These efforts enabled to staff to better inform the Division’s and the Commission’s assessment of how various market segments are functioning and any potential, regulatory response. This work and insight allowed the Division to contribute to more than 20 COVID-related temporary rules, exemptive orders, staff no-action letters and other staff statements including temporary relief addressing filing and delivery challenges, providing additional tools for obtaining credit and permitting fund boards to meet virtually. Ms. Blass also is a member of the SEC’s internal COVID-19 Market Monitoring Group and contributed to the Staff’s report on the U.S. Credit Markets Interconnectedness and the Effects of the COVID-19 Economic Shock.
Board Outreach Initiative
Under her leadership, the Division launched the board outreach initiative to comprehensively review and reevaluate board responsibilities. Through this initiative, Ms. Blass and the outreach team met with dozens of fund directors and collected insights that informed many initiatives including the new rules on exchange-traded funds and fund fair valuation practices, as well as a staff no-action letter on board oversight of affiliated transactions.
Improving Regulatory Oversight
With over 200 dedicated professional staff tasked with overseeing a growing and complex asset management industry, Ms. Blass took several measures to improve Investment Management’s ability to oversee the industry. This included: (1) the formation of the specialized industry unit which houses the Division’s exchange-traded fund, money market fund, ERISA, operations and private fund portfolio specialists; (2) the recommendation for modernizing the process for the review of exemptive applications, including streamlined reviews of routine applications; (3) the reorganization and expansion the division’s legal and policy support to the Division of Examinations; and (4) the formation of the Asset Management Advisory Committee to provide the division and the Commission on how to make the asset management regulatory framework more effective and efficient.
Ms. Blass returned to the SEC as Director of the Division of Investment Management in September 2017 from private practice, where she advised on a broad range of investment fund, private equity, and regulatory matters. She previously served in a number of leadership roles in the Division of Investment Management for over a total of more than 14 years at the SEC. Ms. Blass is the recipient of the Distinguished Service Award and the Manuel F. Cohen Award. Ms. Blass was also named in Barron’s inaugural list of the 100 Most Influential Women in U.S. Finance. Earlier in her career, Ms. Blass practiced corporate law in New York and London.
Ms. Blass earned a J.D. from Columbia University School of Law. She received her B.A in international studies from the American University and studied political science at the American University in Cairo.
Upon Ms. Blass’s departure, Sarah ten Siethoff will become the acting Director of the Division of Investment Management.