SEC Staff Guidance on Diversity Underscores a Sad Truth

WASHINGTON, D.C. – Today, the Diverse Asset Managers Initiative issued a statement following the release of a SEC staff FAQ on investment adviser consideration of DEI factors. The SEC staff guidance is in response to a recommendation put forth by the Asset Management Advisory Subcommittee on Diversity and Inclusion in July 2021.

“We appreciate the guidance provided by the SEC for the intentional incorporation of diversity, equity, and inclusion within entities seeking investment advisers – any and all efforts to facilitate such long overdue change should be applauded,” said Robert Raben, Executive Director for the Diverse Asset Management Initiative. “It is, however, tough to admit that the opposition to women and people of color in asset management is so stark that the premier regulatory agency was compelled to put out guidance that it’s ok to work with them.”

SEC staff guidance is meant to be helpful, to mitigate criticism that seeking diversity in asset managers is appropriate.

“Accordingly, an adviser that recommends other investment advisers to or selects other advisers for their clients may consider a variety of factors in making a recommendation or selection, including, but not limited to, factors relating to diversity, equity, and inclusion, provided that the use of such factors is consistent with a client’s objectives, the scope of the relationship, and the adviser’s disclosures,” the report states. “Further, the adviser’s fiduciary duty does not mandate restricting such a recommendation or selection to investment advisers with certain specified characteristics, such as a minimum amount of assets under management or a minimum length of track record.”

That the guidance is necessary lays bare the underlying prejudice, that the majority of white asset allocators still believe that working with women and people of color sacrifices performance, notwithstanding all data to the contrary.