In a statement issued on August 22, 2012, SEC Chairman Mary Schapiro announced that the SEC would not vote on money market fund reform proposals at a meeting scheduled for August 29, 2012 due to a lack of support from a majority of the SEC commissioners. Ms. Schapiro noted that she believed that structural reform was still necessary in light of her position that money market funds remain susceptible to “runs.” She also signaled that the SEC’s decision not to advance a formal proposal could provide “the needed clarity for other policymakers” to consider addressing money market fund issues. These other policymakers include the Financial Stability Oversight Council (“FSOC”) and the FRB. For example, the FSOC could exercise jurisdiction over a money market fund by designating the fund or its sponsoring advisory organization as a “systemically important financial institution.” The FRB could take indirect measures, such as imposing stress testing for banks that sponsor money market funds. There have been several reports that members of FSOC will be considering appropriate next steps.
On August 23, 2012, SEC Commissioner Luis Aguilar issued a statement discussing his opposition to a formal money market fund reform proposal at this time, and expressing his support for issuing a concept release to solicit input on the cash management industry, as a whole, including the role of SEC-registered money market funds. Commissioner Aguilar also called for further study on the impact of the SEC’s 2010 amendments to its money market fund regulations before any additional reforms are advanced. On August 28, 2012, as the Financial Services Alert was preparing for publication, SEC Commissioners Gallagher and Paredes issued a statement discussing their decision not to support the money market fund reform proposal favored by the SEC Chairman and outlining their favored approach to improving SEC oversight and regulation of money market funds.
The Alert will continue to provide ongoing coverage of developments related to money market fund reform as they occur.