Vanguard boss to FSOC: Butt out

McNabb tells oversight committee additional money market reform is purview of SEC; 'appropriate agency'

Jan 15, 2013 @ 4:42 pm

By Andrew Osterland

Vanguard CEO William McNabb published an open letter to the Financial Stability Oversight Council suggesting the regulator stay out of the ongoing battle over further regulation of the money market fund industry.

“FSOC should not make recommendations to the SEC at this time,” the letter said in the opening of Mr. McNabb's observations on the FSOC proposal. “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 Securities & Exchange chairman Mary Schapiro could not convince other SEC commissioners to do so. 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, as happened during the financial crisis.

Vanguard currently has approximately $200 billion invested in money market funds, according to the letter sent by Mr. McNabb.

The fund giant's chief executive 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.

“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.”

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