Money Fund Reform Has Top Support

Publication: New York Times

Author: Edward Wyatt

11/13/2012 - WASHINGTON — A council of top financial regulators, upset with the Securities and Exchange Commission for failing to strengthen rules governing money market mutual funds since the financial crisis, is trying to force the S.E.C. to adopt stricter regulations.

The Financial Stability Oversight Council, a group of 10 regulators that includes the S.E.C. chairwoman, voted Tuesday to offer three distinct alternatives and said it would recommend one or a combination of those to the S.E.C. for adoption.

The options, which mirror recent changes that failed to gain enough support to pass the five-member commission, include having money funds establish a floating net asset value, replacing the steady $1-a-share price that funds use now, or forcing the funds to set aside more cash to absorb possible losses in the value of its holdings.

If the S.E.C. does not follow through on the council’s proposals, officials said, the council could draw on other powers to impose its own tougher oversight on the mutual fund companies and banks that sell money market funds publicly or on the funds themselves.

The action Tuesday was the strongest instance yet of the council flexing the considerable muscle given to it by the Dodd-Frank Act, the financial regulatory overhaul enacted in 2010 after the financial crisis. The council, a centerpiece of the act, is led by the Treasury secretary and includes the chief regulators for the banking, housing finance, securities and consumer finance industries.

Efforts by Mary L. Schapiro, the S.E.C. chairwoman, to enact tougher rules on money market funds stalled last August after heavy lobbying by the industry. Three of the S.E.C.’s five commissioners had indicated that they would oppose the proposed rules.

But Timothy F. Geithner, the Treasury secretary, has consistently favored the tightened rules that Ms. Schapiro was advocating, and he persuaded the oversight board to leverage its new powers to push the S.E.C. to act.

Read the full article, Money Fund Reform Has Top Support, on the New York Times website.

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