The Financial Stability Oversight Council, a group of 10 regulators that includes SEC Chairwoman Mary Schapiro, voted unanimously on Tuesday to advance proposed changes to money market funds and was seeking public comment.
Using its authority under Section 120 of the Dodd-Frank Act, FSOC said it was proposing several alternatives for structural reforms to address the risks posed by money market funds.
After three commissioners at the Securities and Exchange Commission (SEC) would not go along with her plan to reform money market funds, Schapiro said the issue of money market fund reform “is too important to investors, to our economy and to taxpayers to put our head in the sand and wish it away.” Money market funds’ “susceptibility to runs needs to be addressed. Other policymakers now have clarity that the SEC will not act to issue a money market fund reform proposal and can take this into account in deciding what steps should be taken to address this issue.”
The FSOC proposed three alternatives for consideration:
– Alternative One: Floating Net Asset Value.
Require MMFs to have a floating net asset value (“NAV”) per share by removing the special exemption that currently allows MMFs to utilize amortized cost accounting and/or penny rounding to maintain a stable NAV. The value of MMFs’ shares would not be fixed at $1 and would reflect the actual market value of the underlying portfolio holdings, consistent with the requirements that apply to all other mutual funds.