Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro said late Wednesday that she has lost her fight to further reform money-market funds.
In a statement, Schapiro said that three commissioners, constituting a majority of the commission, informed her that they would not support a staff proposal to reform the structure of the funds. Those proposed reforms, she said, “were intended to reduce their susceptibility to runs, protect retail investors and lessen the need for future taxpayer bailouts.”
Schapiro decided to cancel a vote on the reform proposal after getting word from Commissioner Luis Aguilar, a Democrat, the he would join the two Republican commissioners in voting against the proposal. Aguilar told The Wall Street Journal Schapiro’s plan could have too many unintended consequences and drive investors into other unregulated corners of the short-term market.
“I’m not comfortable supporting the proposal as is,” Aguilar told the Journal. He added that regulators should instead conduct a thorough review of the entire cash-management industry.
The Investment Company Institute (ICI) released a statement on Thursday stating that ICI and all its members are “pleased” that the commission will not be pursuing further money-market reforms. “Like hundreds of other organizations that have submitted their views, we have strongly opposed the structural changes to money-market funds under consideration at the SEC, because of the adverse consequences of these proposals for investors, issuers and the economy.”
Dale Brown, president and CEO of the Financial Services Institute (FSI), said Schapiro’s decision to not follow through with a vote on further reforms “is a very encouraging development.” Investors, he said, ”look to money-market funds for liquidity, diversification and convenience, along with a market-based yield. Money-market funds also play a crucial role in meeting businesses’ short-term financing needs and form a vital link in providing financing for state and local governments.” Imposing a floating NAV on the funds “is simply not in the best interests of American investors or businesses,” he said.