REFILE-SEC's Aguilar says could support money market reforms

Fri Dec 7, 2012 11:31am EST

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By Sarah N. Lynch

WASHINGTON Dec 7 (Reuters) - Luis Aguilar, a Democratic member of the U.S. Securities and Exchange Commission, said he is more open to supporting a money market fund proposal now that the agency's economists have completed a study on the issue.

"The huge benefit of having the study and the comments we receive on the study is that it will put me, and I suspect my colleagues, in a much better position to allow us to vote on a proposal," Aguilar told Reuters on Friday.

"It's important information that was lacking in the earlier draft."

Aguilar's comments could provide a breakthrough for the SEC, which has been deadlocked on whether or not to proceed with a new round of money market fund reforms for the $2.6 trillion industry.

Aguilar said he's optimistic the proposal could be done in early 2013, but that will be after SEC Chairwoman Mary Schapiro steps down, leaving the agency split evenly between two Republicans and two Democrats.

It is unclear if either of the SEC's two Republicans would be willing to support a proposal. In order to advance next year, it would need support from at least one of them.

In August 2012, Schapiro announced that she could not muster enough support from Aguilar or the SEC's two Republican commissioners - Troy Paredes and Daniel Gallagher - for a proposal that she believes will reduce the risk of runs on money market funds.

The three said they felt the SEC first needed to study the impacts of 2010 reforms for the industry before launching a new round of rules.

That study was released earlier this week. It found that while the 2010 reforms helped bolster the industry, they would not have been enough to prevent a run on the Reserve Primary Fund in 2008 during the financial crisis.

Schapiro's proposal contained several options, including capital buffers and redemption hold-backs, or shifting from a stable $1 per share net asset value to a floating NAV.

The industry has staunchly opposed those proposals, saying they could severely reduce investor interest in the products, which are generally considered safe investments.

Aguilar said he could potentially vote for a proposal containing either of those options, so long as they were substantiated with the findings in the study.

He added that the SEC's staff is currently drafting an early-stage proposal incorporating the study's findings. (Reporting By Sarah N. Lynch; Editing by Kenneth Barry)

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