[Draft 1] - Asset Manager Disclosures

[Simone]

The World Assembly (WA),

Noting that asset management is an industry prevalent in numerous WA states;

Desiring a common solution across WA states to disclosure requirements for asset managers;

The WA hereby enacts as follows:

1. Definitions.
   1. "A2M" refers to authorized asset managers duly authorized by an authority to manage, on a discretionary basis, the assets of independent third parties. This is regardless of whether they are managing the assets of sophisticated investors or others.
   2. "Authority" refers to an entity designated by a WA state to enforce and interpret this resolution.
   3. "FISA" refers to the WA Financial Services Authority.
2. Risk controls. Each authority shall ensure minimum standards for A2Ms in:
   1. internal and external audit, internal control, compliance, and corporate governance for the A2M;
   2. risk management governance and measures sufficient to meet the needs of managing the assets that the A2M purports to manage, especially in the case of investments in complex financial instruments.
3. Marketing. Each authority shall ensure that:
   1. an A2M must ensure that all representations made in the marketing materials of an A2M must be accurate and not misleading, biased, or materially deceptive;
   2. an A2M that offers a guaranteed product (either a guaranteed return of principal or a guaranteed return on top of principal, and, for this purpose, includes money markets funds) must disclose the counterparty responsible for the guarantee, and the terms of conditions of such a guarantee.
4. Complaints handling. Each authority shall ensure that:
   1. an A2M must have appropriate adequate procedures in place for handling any customer complaints, and that such complaints are handled by a senior member of the management of the A2M;
   2. an authority is required to have appropriate channels for handling complaints escalated by a customer in the event the complaint is not resolved by the A2M.
5. Fees and expenses. Each authority shall ensure that:
   1. an A2M discloses to each customer the fees and expenses charged (or potentially to be charged) as part of the business relationship between the A2M and the customer;
   2. an A2M discloses all pertinent details regarding any rebates, soft commissions, and other charges associated with the said business relationship.
6. Risk disclosures. Each authority shall ensure that an A2M makes periodic disclosures (and any additional disclosures that may arise due to a change of circumstances) regarding the risks associated with an investment:
   1. risks with investing in a particular state including changes to the political and economic environment, whether it is a WA state or not;
   2. risks with investing in a particular industry;
   3. Risks with climate change, and other physical changes to the environment that may affect the customers’ investments;
   4. Risks with currency, including exchange rate risks, and the possibility of restrictions on conversion;
   5. Possible reputation risks in potential investments in companies, such as those that manufacture tobacco, nuclear weapons, or cannibalistic meat;
   6. Counterparty risks with broker-dealers with which the A2M transacts financial instruments;
   7. Other risk disclosures as determined by the authority.
7. Valuation. Each authority shall ensure that an A2M provide valuation data to customers based on the following minimum standards:
   1. Periodic reporting of the valuation of all assets held on behalf of a customer to the said customer, based on an evaluation of market values and with the approval of the external auditors of the company;
   2. Stress test data regarding the valuation of assets based on the internal risk assessment models of the A2M;
   3. Valuing assets for which no liquid market exists, which shall be valued on a conservative basis and take into account potential significant fluctuations in price.
8. Model standards.
   1. FISA shall provide model standards (and to update these standards from time to time) for WA states that prefer to adopt common standards for the aforesaid clauses in lieu of setting standards themselves.
   2. Standards set by WA states may not be less stringent than FISA’s model standards.
9. Interpretation.
   1. If FISA is the enforcing authority, FISA is responsible for interpretation.
   2. Each WA state may designate one or more entities as the authority, depending on the governance structure of that state.

 

[Simone]

Potentially to combine with "asset manager conduct" into a single resolution.