Views on improving the integrity of global capital markets
24 August 2012

SEC Delay: Postponing the Inevitable for Money Market Funds?

The stakes in the debate over money market funds (MMFs) — and the risk they pose to systemic risk — escalated further with the SEC’s recent announcement that it lacks votes to issue a public proposal.  Gridlock on the five-member commission, it appears.

The issue is far from resolved, however, with a growing chorus seeking strong action. Another voice joined in last week, when New York Fed Chair William Dudley cautioned that the money market fund industry is a smoldering systemic risk, potentially of massive proportions.

In terms similar to the statement by Sheila Bair, chair of the CFA Institute co-sponsored Systemic Risk Council, Dudley maintains that prompt actions are needed. Shapiro’s recommendations are a good place to start. Whether converting the industry to a floating NAV, like the rest of the mutual fund industry, is too radical remains to be seen.

Despite this election-year delay, action is clearly needed. Let’s just hope it’s not too little, too late. What are your views?

About the Author(s)
John Rogers, CFA

John Rogers, CFA, is the former president and CEO of CFA Institute.

1 thought on “SEC Delay: Postponing the Inevitable for Money Market Funds?”

  1. Chris Tobe says:

    I have mixed feelings on this. I am a supporter of certain types of stable value investments in 401(k), but not all. The near 0 interest rates produce a great challenge to MM funds and limit their ability to charge additional fees.

    Certain investors have a mentality in which you can label them “savers” who demand a product without principal fluctuation. Bank deposits have historically been this product, but they have their own sets of regulations and capital requirements. Of the 2 proposed SEC solutions, I support the SEC solution of extra capital requirements to set up a level playing field with banks, but allowing them to keep a stable NAV

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