McNabb to FSOC: Forget funds

Jan 20, 2013 @ 12:01 am

By Andrew Osterland

William McNabb, chief executive of The Vanguard Group Inc., wants the Financial Stability Oversight Council to stay out of the battle over money market fund regulation.

“FSOC should not make recommendations to the SEC at this time,” Mr. McNabb said in an open letter to the council, which was created by the Dodd-Frank financial reform law to allay significant risks to the economy. “The SEC is the appropriate agency to determine which additional reforms should be implemented for MMFs.”

In November, the FSOC proposed additional regulations on money market funds after Mary Schapiro, then chairman of the Securities and Exchange Commission, could not persuade other members of the SEC to support new regulations to reduce the risk of a run on funds, as there was in 2008. The FSOC recommended that funds be required to float the reported net asset value of the fund and/or keep capital buffers against the risk of runs on the funds.

Vanguard has roughly $200 billion invested in money market funds, according to the letter sent by Mr. McNabb. He also suggested that any further reforms by the SEC be limited to funds that invest in securities issued by banks, financial institutions and operating companies — the so-called institutional prime money funds.

CALLS FOR FOCUS ON PRIME FUNDS

“By focusing additional reform measures on institutional prime MMFs,” Mr. McNabb wrote, “regulators will be able to appropriately address the most concerning risks while retaining Treasury, government and tax-exempt money market funds in their current form for the retail investor.”

This month, BlackRock Inc., The Goldman Sachs Group Inc., JPMorgan Chase & Co., Fidelity Investments, Federated Investors Inc. and The Charles Schwab Corp. said they would begin disclosing their money market funds' net asset values each day. Vanguard said it would not follow the crowd.

aosterland@investmentnews.com Twitter: @aoreport

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