U.S. DEPARTMENT OF THE TREASURY

U.S. D E PARTM E NT O F TH E TR EAS U RY

A Financial System That Creates Economic Opportunities Asset Management and Insurance

OCTOBER 2017

THE DEPART

TREASURY

MENT OF THE 1789

U.S. D E PARTM E NT O F TH E TR EAS U RY

A Financial System That Creates Economic Opportunities Asset Management and Insurance

Report to President Donald J. Trump Executive Order 13772 on Core Principles for Regulating the United States Financial System

Steven T. Mnuchin Secretary

Craig S. Phillips Counselor to the Secretary

MENT OF THE 1789

THE DEPART

TREASURY

Staff Acknowledgments

Secretary Mnuchin and Counselor Phillips would like to thank Treasury staff members for their contributions to this report. The staff's work on the report was led by Jared Sawyer and Dan Dorman, and included contributions from Joseph Dickson, Rebekah Goshorn, Sharon Haeger, Alex Hart, Gerry Hughes, W. Moses Kim, Daniel McCarty, Bimal Patel, Bill Pelton, Frank Ragusa, Jessica Renier, Bruce Saul, Steven Seitz, Brian Smith, James Sonne, Mark Uyeda, and Darren Vieira.

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction 3 Scope of This Report 3 Review of the Process for This Report 4 Asset Management Industry in the United States 4 Insurance Industry in the United States 5 Summary of Issues and Recommendations 6

Asset Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Introduction 13 The Regulatory Structure of the Asset Management Industry 18 Systemic Risk and Stress Testing 29 Efficient Regulation and Government Processes 32 International Engagement 55 Economic Growth and Informed Choices 64

Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Introduction 73 The Regulatory Structure of the Insurance Industry 80 Systemic Risk and Solvency 97 Efficient Regulation and Government Processes 104 International Engagement 130 Economic Growth and Informed Choices 140

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Appendix A: Participants in the Executive Order Engagement Process 147 Appendix B: Regulatory and Legislative Recommendations 153

A Financial System That Creates Economic Opportunities ? Asset Management and Insurance iii

iv A Financial System That Creates Economic Opportunities ? Asset Management and Insurance

Acronyms and Abbreviations

Acronyms and Abbreviations '40 Act Advisers Act AUM Banking Report

BHC BICE CFPB CFTC Code Compact CPO CTA Dodd-Frank

DOL ECP ERISA ETF EU Exchange Act Executive Order

FASB FDIC FEMA FIO FINRA FRB FSB FSOC

Term Investment Company Act of 1940 Investment Advisers Act of 1940 Assets Under Management June 2017 Report published by Treasury on Banks and Credit Unions Bank Holding Company Best Interest Contract Exemption Consumer Financial Protection Bureau Commodity Futures Trading Commission Internal Revenue Code Interstate Insurance Product Regulation Compact Commodity Pool Operator Commodity Trading Advisor Dodd-Frank Wall Street Reform and Consumer Protection Act U.S. Department of Labor Exempt Commercial Purchasers Employee Retirement Income Security Act Exchange Traded Fund European Union Securities Exchange Act of 1934 Executive Order 13772 on Core Principles for Regulating the United States Financial System Financial Accounting Standards Board Federal Deposit Insurance Corporation Federal Emergency Management Agency Federal Insurance Office Financial Industry Regulatory Authority Board of Governors of the Federal Reserve System Financial Stability Board Financial Stability Oversight Council

A Financial System That Creates Economic Opportunities ? Asset Management and Insurance

v

G-20 GAAP GAO GDP G-SIFI G-SIB G-SII HHS HUD IAIS IASB iCBCM ICS IFRS IIPRC IOSCO IRA

IRS ISLHC L&H LTC McCarran-Ferguson

MMMF NAIC NARAB NARAB II

NAV NBNI G-SIFI

NFA NIPR

Group of 20 Generally Accepted Accounting Principles U.S. Government Accountability Office Gross Domestic Product Global Systemically Important Financial Institution Global Systemically Important Bank Global Systemically Important Insurer U.S. Department of Health and Human Services U.S. Department of Housing and Urban Development International Association of Insurance Supervisors International Accounting Standards Board Cross-Border Crisis Management Group for Insurers Insurance Capital Standard International Financial Reporting Standards Interstate Insurance Product Regulation Commission International Organization of Securities Commissions Individual Retirement Account or Individual Retirement Annuity Internal Revenue Service Insurance Savings and Loan Holding Company Life and Health Long-term Care The McCarran?Ferguson Act of 1945, 15 U.S.C. ?? 1011-1015 Money Market Mutual Fund National Association of Insurance Commissioners National Association of Registered Agents and Brokers National Association of Registered Agents and Brokers Reform Act of 2015 Net Asset Value Non-Bank, Non-Insurer Global Systemically Important Financial Institution National Futures Association National Insurance Producer Registry

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