The Securities and Exchange Commission is “very sensitive” to preserving money market funds as it proceeds “to the adopting phase” of a rulemaking, with a “laser” focus on the tax, cost and accounting concerns such a rule could pose, SEC Chairwoman Mary Jo White said at the end of March.
During a luncheon conversation at the U.S. Chamber of Commerce’s Eighth Annual Capital Markets Summit, White also said that there was “a crying need” for more resources to help the agency boost its examination of the nation’s investment advisors.
The commission is considering two “significant proposals” for additional reform to money market funds that were put out for comment last June: a floating net asset value for prime institutional money market funds—the type of fund that experienced problems during the financial crisis—and a proposal to require money market funds under certain circumstances to impose a liquidity fee and permit the imposition of redemption gates.
The latter is designed to stop a “run.” As White stated previously, these proposals could be adopted alone or together.
The floating NAV, she said, is where “the cost, tax and accounting concerns come in.”
“We are very sensitive to preserving the [money market fund] product as part of this [rulemaking] process,” White said.
David Hirschmann, president and CEO of the Chamber’s Center for Capital Markets Competitiveness, said to White that there’s a belief that “all mutual funds” pose a “run risk.”
White responded that mutual funds “all have redemption risk; the SEC oversees how redemptions are handled” and ensures they have enhanced liquidity, “but that doesn’t translate to me that therefore you should regulate [a mutual fund] like a bank.”