What Is the Division of Investment Management?
The Division of Investment Management is a branch of the U.S. Securities and Exchange Commission (SEC) overseeing investment funds, professional fund managers, securities research analysts, and investment advisers. The overarching goal of the Division of Investment Management is to protect retail investors from fraud and abuse within the investment industry.
Key Takeaways
- The Division of Investment Management is a branch of the SEC that oversees mutual funds, ETFs, and investment advisers and managers.
- The overarching goal of the division is to protect retail investors from fraud and abuse within the investment industry.
- The division oversees the registration, disclosures, and advertising of funds and variable insurance products.
- A secondary concern is assisting industry professionals as they attempt to comply with sometimes complex and onerous regulations.
How the Division of Investment Management Works
The Division Investment Management acts under the authority of federal securities laws such as the Investment Company Act of 1940 and the Investment Advisers Act of 1940. One of the primary goals of the division is to protect retail investors from fraud and abuse within the investment industry. A secondary concern is assisting industry professionals as they attempt to comply with sometimes complex and onerous regulations.
The Division Investment Management is charged with developing regulatory policies and overseeing the registration, disclosures, and advertising of several types of investment companies and their products, including the following:
- Mutual funds, which are a basket of equities or securities in which various investors pool their money
- Exchange traded funds (ETF)s, which contain securities that track an underlying index with the goal mirroring the index, such as the
- Variable insurance products, which are insurance products with an investment component embedded in them
- Investment advisers, which perform various duties to help investors research, select, and invest in securities
The Division of Investment Management used to regulate public-utility holding companies until that oversight was changed with the passage of the Energy Policy Act of 2005. The regulation of utilities was transferred to the Federal Energy Regulatory Commission (FERC).
Offices of the Division of Investment Management
Four main offices carry out the division’s four-pronged mission of guidance, disclosure, rulemaking, and analysis.
Chief Counsel’s Office (CCO)
The Chief Counsel’s Office (CCO) primarily interprets federal securities laws relevant to the investment management industry. It issues interpretive letters and reviews exemption requests from the regulations sent by investment companies. The CCO makes recommendations to the SEC as to whether or not to grant partial or full exemption from regulatory rules for the investment company.
The CCO also gives individualized interpretive advice to investment professionals seeking to operate within the bounds of federal law. Complaints about potential violations of federal securities laws or division policies pass through the CCO.
Disclosure Review and Accounting Office (DRAO)
The Disclosure Review and Accounting Office (DRAO) reviews investment and variable insurance filings such as initial registration statements, financial statements, and proxy statements, which are investor disclosures containing information related to upcoming decisions and changes within a company.
The DRAO’s more directly works with investment companies and advisers to comply with disclosure and accounting policies of federal securities laws. In 2018, the DRAO published a new website that keeps all disclosure references and necessary forms in one place to simplify the process for both investment companies and retail investors. Pages within the site include Fund Disclosure at a Glance, Accounting and Disclosure Information (ADI), and Disclosure Reference Material.
Analytics Office
The Analytics Office monitors shifts in the investment management industry, providing the Division of Investment with current, accurate data on which to base its actions. The Analytics Office makes its risk analyses and forecasts publicly available. The Analytics office is charged with four areas of responsibilities:
- Monitor and analyze the asset management industry data collected by the SEC.
- Perform financial analysis of the asset management industry.
- Obtain information directly from funds, investment companies, and advisors to analyze on behalf of the SEC.
- Maintain industry knowledge and technical expertise to act as an expert resource with the goal of helping any of the ongoing SEC activities.
Rulemaking Office
The Rulemaking Office considers new and amended rules and forms related to federal securities laws and on behalf of the SEC. The office also provides interpretations of rulings for the SEC regarding the asset management sector. The office is in charge of preparing Congressional testimony and facilitating Congressional inquiries as the need arises.
