Big business to SEC: Lay off money funds

Big business to SEC: Lay off money funds
Business group, along with a score of big companies, tell commission to keep $1 NAV, ditch buffer idea By Mark Schoeff Jr.
MAR 19, 2012
Several large corporations are urging the Securities and Exchange Commission to leave money market funds alone, arguing that any new regulations would crimp their ability to raise capital. In a speech last November to a meeting of the Securities Industry and Financial Markets Association, SEC Chairman Mary Schapiro said that money market reform was a priority. She indicated that the commission plans to issue a proposal designed to prevent the investment vehicles from the kind of default that forced one of them to “break the buck” during the 2008 financial crisis. Today, 23 corporations and large business organizations sent a letter to Ms. Schapiro saying that no further money market reforms are required beyond those made in 2010, which tightened credit standards and imposed a liquidity requirement. “We firmly believe existing regulations ensure the continued stability and viability of money market funds, and that additional regulatory options being considered will have dramatic negative consequences on American businesses' ability to raise the capital necessary to restore economic stability and job creation,” stated the letter, which was signed by CVS Caremark Corp., FMC Corp., Johnson & Johnson, Kraft Foods Global Inc., Safeway Inc., the Boeing Co., Tyson Foods and the U.S. Chamber of Commerce, among others. The businesses asserted that money market funds buy more than one third of “commercial paper” issued by U.S. companies. That financing supports daily cash management, inventory restocking and expansion. “If new regulations cause money market fund assets to decline, the decline will also be seen in money market fund purchases of commercial paper and short-term instruments that are so vital in funding U.S. companies, municipalities and state governments,” the letter states. Ms. Schapiro said that the SEC is developing a rule that would require money market funds to have a source of capital to draw on in an emergency, a so-called capital buffer. This backstop would ensure that they would continue to deliver the $1 net asset value they promise investors, even in a crisis. She also said that a proposal for a floating net asset value also remains on the table. The businesses oppose both ideas. “Additional changes to money market funds, such as moving to a floating NAV or adding a capital buffer, would almost certainly lessen the viability and attractiveness of these funds,” the letter states. In her November speech, Ms. Schapiro said that the SEC would release a money fund proposal within a couple of months.

Latest News

Vanilla, WealthFeed land new RIA partnerships
Vanilla, WealthFeed land new RIA partnerships

Vanilla is extending its estate planning tech to Callan Family Office's ultra-high-net-worth business, while WealthFeed's organic growth engine will now be available to roughly 100 advisors at The Mather Group.

As Trump Accounts prep for July 4 launch, Franklin Templeton plans $1,000 match
As Trump Accounts prep for July 4 launch, Franklin Templeton plans $1,000 match

“We are helping families take an important first step toward building a financial foundation for the next generation,” said Franklin Templeton CEO Jenny Johnson

Savant Wealth Management enters Maine with latest acquisition
Savant Wealth Management enters Maine with latest acquisition

Richard Brothers Financial Advisors joins the fee-only RIA, adding its first Maine office and $240 million in client assets

Clearstead adds $5.3B Philadelphia wealth team from myCIO
Clearstead adds $5.3B Philadelphia wealth team from myCIO

Cleveland RIA grows to $68 billion in assets as Philadelphia team, deepening its high-net-worth and retirement-plan practice.

Advisors still have questions on Trump Accounts ahead of July 4 launch
Advisors still have questions on Trump Accounts ahead of July 4 launch

Financial planning leaders say unresolved rules on fees, Roth conversions and financial aid complicate comparisons with 529 plans.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.