On 2013-06-05, at 7:25 PM, c b wrote: > http://www.washingtonpost.com/business/economy/sec-proposes-changes-to-money-market-fund-rules/2013/06/05/7126a7d8-cd45-11e2-8f6b-67f40e176f03_story.html > > SEC proposes changes to money market fund rules > > The Securities and Exchange Commission unanimously approved the > proposal after what SEC Chairman Mary Jo White described as a > “journey.” The industry once fiercely opposed dramatic changes to > money market funds, but regulators persisted, citing the losses and > panic they sparked during the financial crisis.
>From yesterday's WSJ: The SEC's approach was criticized by those seeking stronger protections. Sheila Bair, former chairman of the Federal Deposit Insurance Corp., said it "falls short" and appears to create "real incentives for gaming and arbitrage." "A better, simpler, market-based solution, would be to require that all money market funds operate like other mutual funds—with prices that float to fully reflect the value of their underlying assets," she said. "This would eliminate the SEC-created incentives to run and result in a much more resilient financial system." Resolving long-standing concerns about the systemic risk posed by money funds is a priority for SEC Chairman Mary Jo White, who is under pressure from U.S. and global regulators to address vulnerabilities in the popular cashlike investments. A council of top financial regulators, led by Treasury Secretary Jacob Lew, had threatened to push its own rules if the SEC failed to correct structural deficiencies that make money funds susceptible to investor stampedes during times of market stress. "We commend the SEC, and Chair Mary Jo White, for continuing the work to address remaining vulnerabilities to our financial system presented by money market funds," the Treasury said in a statement. The SEC's move comes after a proposal championed by former SEC Chairman Mary Schapiro faltered last year amid heavy industry lobbying and internal SEC bickering over how best to address the risk of investor runs. Ms. Schapiro proposed requiring all money funds to either float their share price or post bank-like capital to ensure they could make good on redemptions when asset holdings suddenly drop in value. The SEC took a softer approach, targeting only prime institutional funds—roughly 37% of the industry and the corner seen as most prone to investor stampedes. The proposal doesn't include capital requirements. "I hope the commission will remain open to meaningful reform of the entire sector and not just institutional prime funds," Ms. Schapiro said in a statement. More than $300 billion, or 15% of prime-fund assets, fled money funds in one week after the collapse of Lehman Brothers Holdings Inc. in September 2008. Large corporations, securities lenders and other institutions raced to sell shares after the Reserve Primary Fund, one of the largest and oldest prime funds, "broke the buck," as its share price fell below money funds' $1-a-share target. The U.S. was forced to step in and backstop the funds. Two SEC commissioners, Democrat Elisse Walter and Republican Daniel Gallagher, said Wednesday that the SEC should pair withdrawal restrictions, known as "gates" or liquidity fees, with a floating share price. Much of the industry now backs gates or liquidity fees as an alternative to a floating share price. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
