SEC's Schapiro "optimistic" on money fund reform
WASHINGTON (Reuters) - Securities and Exchange Commission Chairman Mary Schapiro said on Thursday she is "optimistic" that more of her fellow commissioners will warm to her plan to reform the $2.6 trillion money market fund industry.
Schapiro made her comments before a U.S. House Oversight panel just a few days after agency staff circulated an internal draft of the proposed money market fund rules for the commissioners to review.
"I am ever the optimistic," she told Rep. Patrick McHenry, R-N.C., who asked how she would proceed as three of the SEC's five commissioners have expressed reservations about adopting new money market fund rules.
"Now that they have a document to look at....we'll see where we go from there," she said.
The three - Democrat Luis Aguilar and Republicans Dan Gallagher and Troy Paredes, have questioned whether more rules are needed as the SEC just finalized a new set of industry rules in 2010. Schapiro has said the 2010 rules were helpful, but still far short of what is needed to prevent a repeat of the 2008 financial crisis.
She acknowledged her colleagues were "not quite yet" on the same page, but said she remained hopeful.
"I am optimistic that people will think that this is something that needs to be publicly aired and discussed and debated," she said.
Schapiro has been calling for additional safeguards for money market funds since last year. She said they remain susceptible to runs such as the one experienced by the Reserve Primary Fund in September 2008 when its net asset value fell below $1.
The SEC's draft money market fund proposal contains two potential plans.
One involves the combination of a capital buffer coupled with a holdback on redemption requests by investors.
The other consists of a floating net asset value - a move that aims to curb investor complacency over the stable $1-per-share value that funds currently quote.
Schapiro said that funds could choose between the options.
She did not give a size for the proposed capital buffer but told reporters after the hearing a 3 percent to 5 percent buffer would not be economical for funds.
"You can have a very much smaller capital buffer when you couple it with redemption requests," she said.
The commissioners have 30 days to review the draft proposal, though Schapiro acknowledged it could take some time for everyone to review and comment on the draft.
Given the strong disagreements among the commissioners, however, it is unclear Schapiro when call a vote on the plan.
(Reporting by Sarah N. Lynch; Editing by Leslie Gevirtz)
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