IAA Strongly Supports FSOC’s Proposed Return to An Activities-Based Approach
May 14, 2026
Financial Stability Oversight Council
Attn: Eric Froman, Office of the General Counsel, Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Re: Authority To Require Supervision and Regulation of Certain Nonbank Financial Companies; RIN 4030-ZA02
Dear Mr. Froman:
The Investment Adviser Association (IAA)[1] appreciates the opportunity to comment on the proposed interpretive guidance (Proposal) published by the Financial Stability Oversight Council (the Council).[2] The IAA commends the Council for proposing to replace the existing interpretive guidance on nonbank financial company determinations and its analytic framework for financial stability risks, and we strongly support the Proposal.
The IAA has repeatedly urged the Council to take an activities-based approach to identifying, assessing, and addressing potential risks and threats to U.S. financial stability. We have also called on the Council to apply a more transparent and rigorous determination process in the unlikely event that a potential risk or threat cannot be addressed through an activities-based approach.[3] We are pleased that the Council intends to prioritize identifying and addressing potential risks to U.S. financial stability using an activities-based approach and to enhance the Council’s analytical rigor and transparency.
We previously supported the interpretive guidance the Council issued in 2019[4] because, like the Proposal, it prioritized an activities-based approach to systemic risk and instituted strong due process provisions, such as requirements to conduct a cost-benefit analysis and assess a nonbank financial company’s likelihood of material financial distress. An activities-based approach to systemic risk focuses on addressing specific financial activities on a system-wide basis rather than focusing on any one company. Unfortunately, the interpretive guidance the Council issued in 2023[5] took a step backwards by deprioritizing the activities-based approach and eliminating important transparency and due process provisions in the designation process for nonbanks.[6]
The Proposal would require the Council to consult with the company’s primary financial regulatory agency when assessing the company and coordinate with that regulator before the Council makes any final determination. This approach is effective because a nonbank financial company’s primary regulator is in the best position to identify gaps in regulation across an industry and take the lead in developing consistent and predictable rules that reduce risk for all entities.
We believe the Proposal appropriately balances the Council’s mandate to identify and respond to emerging threats to U.S. financial stability in a timely and effective manner while also incorporating important due process provisions for any nonbank company under consideration for supervision by the Federal Reserve Board. For these reasons, the IAA strongly urges the Council to adopt the interpretive guidance as proposed.
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Thank you for your consideration of our comments on this important issue. Please do not hesitate to contact the undersigned at (202) 293-4222 if we can be of further assistance.
Respectfully,
Gail C. Bernstein
General Counsel and Head of Public Policy
Laura L. Grossman
Associate General Counsel
[1] The IAA is the leading organization dedicated to advancing the interests of fiduciary investment advisers. For more than 85 years, the IAA has been advocating for advisers before Congress and U.S. and global regulators, promoting best practices and providing education and resources to empower advisers to effectively serve their clients, the capital markets, and the U.S. economy. Our members range from global asset managers to the medium- and small-sized firms that make up the majority of our industry. Together, the IAA’s member firms manage more than $57 trillion in assets for a wide variety of individual and institutional clients, including pension plans, trusts, mutual funds, private funds, endowments, foundations, and corporations. For more information, please visit www.investmentadviser.org.
[2] Financial Stability Oversight Council, Authority To Require Supervision and Regulation of Certain Nonbank Financial Companies (Mar. 30, 2026).
[3] See, e.g., IAA Letter to FSOC re: Authority To Require Supervision and Regulation of Certain Nonbank Financial Companies (May 10, 2019); Joint trade associations letter to FSOC (July 14, 2025); and Joint trade associations letter to FSOC (May 14, 2026).
[4] See Authority To Require Supervision and Regulation of Certain Nonbank Financial Companies (Dec. 30, 2019).
[5] See Guidance on Nonbank Financial Company Determinations (Nov. 17, 2023).
[6] For similar reasons, the IAA strongly supports H.R. 3682, the Financial Stability Oversight Council Improvement Act of 2025. See Joint trade associations letter to Members of the United States House of Representatives (Oct. 29, 2025).