Opposition Delays Sweeping Changes to Money Market Fund Regulations

August 23, 2012 James Heinsman In the News

SEC Chairwoman Mary L Schapiro

Mary L. Schapiro, the chairwoman of the Securities and Exchange Commission, is struggling to bring monumental changes to the way money market mutual funds are regulated. Her plans to vote on her vision this coming week needed to be side-lined when Schapiro realized that 3 of the 5 commissioners were planning on voting against her proposal.

Two of the commissioners who are against Schapiro’s plan are Republicans, but the third commissioner is Democrat Luis A. Aguilar, who admitted that he would only feel comfortable voting for Schapiro’s changes after a more in depth study of the new rules and their implications on the money market mutual fund industry.

One of the elements of Schapiro’s plan is to force the $2.6 trillion money market sector into beginning to hold cash reserves, or to allow their prices of shares to fluctuate, instead of promising to pay investors one to one on every dollar invested.

Schapiro was disappointed that she could not win the support of her colleagues on this issue. Money market mutual funds were a contributing factor in the financial crisis of 2008, and Schapiro believes reform is needed to prevent such disasters from recurring. She says the failure to vote is a short-term win for the financial industry, which has spent millions to persuade the commissioners to vote against the reforms.

“It’s a tragedy that serious thoughtful proposals to shore up a major weakness in the financial system and protect American taxpayers from the potential need to bail out this industry can’t even receive public comment and debate,” Ms. Schapiro said.

Luis A. Aguilar, Mary L. Schapiro, money market mutual funds, SEC,

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