In a recent joint statement, Securities and Exchange Commissioners Troy Paredes and Daniel Gallagher expressed dismay over Chairman Mary Schapiro’s announcement regarding a staff proposal to revamp the money market mutual fund industry that she said would no longer move forward because it would have failed to garner the necessary votes. Gallagher and Paredes expressed concern that her announcement made it seem as if they and Commissioner Luis Aguilar are not worried (and may even be dismissive) about “strengthening money market funds.”
Schapiro recently made it known that she would not be able to get three votes needed to move forward the proposal, which includes reforms to the regulations that preside over money market funds. Under the proposal, funds would have had to either lose their $1 fixed net asset value while floating their NAVs or keep up an under 1% capital buffer. Per her statement, Schapiro said the three commissioners told her that they “will not support a staff proposal to reform the structure of money market funds,” which she believes will protect retail investors and decrease need for taxpayer bailouts in the future. She called on policymakers to look at other ways of dealing with the “systemic risks” involving money market funds. A day after her announcement, the Treasury Department and the SEC were already looking at alternative means to reform the money fund industry.
Paredes and Gallagher want to make it clear that even though they rejected the proposal, this does not mean they are abandoning their duty to regulate money market funds, which fall under the SEC’s jurisdiction for regulation, or that they are unsupportive of making improvements to the way the agency performs oversight. The two of them think the proposal lacks the necessary analysis and data as support and that investors and issuers could have been left with “significant costs” while the system would have possibly become burdened with new risks. They also are concerned that the changes put forward by the proposal would not stop a run on funds. Gallagher and Paredes said that they believe that the SEC “can do better.”
Meantime, Commissioner Aguilar issued his own statement He said that he believes that the cash management industry needs to be examined further before a productive discussion regarding whether more structural changes need to be implemented to SEC-registered money market funds, which is just one industry segment, can take place.
Aguilar talked about how not having this wider foundation of information and knowledge in place could cause harmful repercussions. He also expressed worries that Schapiro’s proposal would compel investors to transfer money from the market fund market, which is transparent and regulated, into the unregulated market.
If you are a money market fund investor who suffered financial losses you feel may have been caused by financial fraud, contact our securities lawyers today.
Statement of SEC Chairman Mary L. Schapiro on Money Market Fund Reform, SEC, August 22, 2012
Statement Regarding Money Market Funds By Commissioner Aguilar, SEC, August 23, 2012
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