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August 29, 2012 at 09:44 AM
The Securities and Exchange Commission’s (SEC) two Republican commissioners, Troy Paredes and Daniel Gallagher, voiced their “dismay” on Tuesday with the statement issued last week by SEC Chairwoman Mary Schapiro, in which she said she lacked the votes needed to pass further money-market fund reforms.
Gallagher and Paredes issued a joint statement in which they detailed their own “way forward” in reforming the funds by imposing “gates” on money-market fund redemptions.
The two commissioners said that they would like to see a proposal issued for comment “that would permit money-market fund boards, as they deem appropriate and consistent with their fiduciary obligations to investors and without having to seek an exemptive order from the commission, to ‘gate’ redemptions to stave off a run and to allow the fund manager time to mitigate the concerns of investors who otherwise may be inclined to redeem.”
Regrettably, Gallagher and Paredes said, Schapiro “dismissed this approach,” and instead issued a draft release to the commission that “relegates gating to a limited discussion of options that are implied to be inferior to the chairman’s preferred alternatives.” Gating, they said, was “never considered as a standalone proposal” in Schapiro’s plans, “but instead is coupled with a capital buffer.”
