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Regulators' Odd Focus on Funds Could End Badly for Investors

Slapping the 'systemically important financial institution' designation on asset managers could cost investors and the broader economy.

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Will an alphabet soup of U.S. and global regulators change how the investment management business works? That answer increasingly appears to be yes--and investors and investment firms should be very worried.

Right now, U.S. and global regulators are conducting parallel inquiries to determine whether asset-management firms should be deemed "systemically important financial institutions," or SIFIs. Globally, a Basel-based group called the Financial Stability Board, or FSB, has led the investigation. In the U.S., using authority granted by the Dodd-Frank Act, a group of regulators called the Financial Stability Oversight Council, or FSOC, has managed its own inquiry.

Scott Cooley does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.