SEC Chairman Mary Schapiro released a statement regarding her fellow Commissioners’ opposition to publishing a proposal to reform the structure of money market funds. According to the Chairman’s statement, three Commissioners have informed Chairman Schapiro they will not support the publication of the proposal (and that it therefore cannot be published for public comment) and have suggested issuance of a concept release instead.
Chairman Schapiro criticized this suggestion as being too go-slow, arguing that a concept release at this point does not advance the discussion as compared to concrete proposals. In the statement, Chairman Schapiro further lays out how most of the risks inherent in money market funds have resulted from SEC rules as to valuation standards and a (supposedly) stable net asset value, without any capital or asset cushion. Given that it is SEC Rules that have created the risk, it is implicit in Chairman Schapiro’s remarks that the SEC is obligated to address the risks. Finally, Chairman Schapiro outlines two reform alternatives that she believes would address the structural issues.
[Lofchie Comment: Chairman Schapiro’s statements as to money market funds are consistent with prior statements by various staff members of the Federal Reserve Bank, such as a prior statement by the President of the Federal Reserve Bank of Boston. Also, the recent first annual report of the Financial Stability Oversight Council (at page 134) [big document that may be very slow to open], of which Chairman Schapiro is a member, expressed the view that money market funds were an area of systemic risk.]
View statement in full here (links externally to SEC website).