“Federal securities regulators had warned of flaws in a U.S. Treasury draft report that could lead to costly regulations on large asset managers, people familiar with the matter told Reuters on Monday.

“Last week the Office of Financial Research released the report, which found that activities of asset managers could pose risks to the broader marketplace.

“It sent shockwaves through the industry, because the findings could encourage regulators to designate big asset managers as ‘systemic’ – a tag that brings tough capital requirements and supervision by the U.S. Federal Reserve.

“The Securities and Exchange Commission, however, had been quietly advocating for major changes to the study for months, according to the sources.

“One of the SEC’s chief concerns stems from an earlier draft of the report that the agency felt exaggerated the riskiness of the business. The SEC has also been concerned that the people involved in the study lack a fundamental understanding of the fund industry itself, these people said.”

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