Regulators missed chance to reform money market funds: Krawcheck

NEW YORK, date Mon Jun 3, 2013 3:10pm EDT

1 of 2. Sallie Krawcheck, the former president of the Global Wealth & Investment Management division of Bank of America, speaks during the Reuters Wealth Management Summit in New York June 3, 2013.

Credit: Reuters/Shannon Stapleton

NEW YORK, date (Reuters) - She didn't get the job, but if Sallie Krawcheck were running the Securities and Exchange Commission she knows where her priorities would lie.

The former head of Bank of America Corp's (BAC.N) global wealth and investment management division would replace the reams of disclosure documents given to brokerage clients in favor of a single page of salient facts about products, potential conflicts and risks.

And she would move post-haste for "real reform" of the way money-market funds are accounted for on banks' books.

"Reform of money funds (has been) way too long in coming," Krawcheck, the 48-year-old former head of Bank of America Corp's wealth management division, said Monday at Reuters Global Wealth Management Summit. "It's a big, glaring miss coming out of the downturn."

Krawcheck said she would oppose any halfway solutions that would apply only to part of the $2.6 trillion money-market fund industry. The SEC is believed to be considering rules that would apply to prime funds that buy securities issued by corporations but not to funds that invest primarily in government securities.

Regulators hope extra safeguards will prevent the type of runs on money funds that happened during the financial crisis. The collapse of the Reserve Primary fund in September 2008 played havoc with retail brokerage firms in the heart of the financial crisis as investors feared a collapse of all funds where brokerage firms were parking their spare cash.

Krawcheck, now involved in entrepreneurial ventures to sell investments to individual investors and promote women in financial services, was fired from Bank of America in September 2011 after a meteoric career that included running brokerage firms Sanford C. Bernstein & Co, Smith Barney and Merrill Lynch.

She was widely reported to have sought the top job at the securities regulator after Mary Schapiro resigned as SEC chairman last December. The post went to former federal prosecutor Mary Jo White, who will consider money-market reform when SEC commissioners meet on Wednesday.

Krawcheck would not comment directly on her governmental ambitions, which could also include heading other consumer- related agencies, but said that anyone who has had the good fortune to succeed should consider public service "very carefully" as part of a "well-rounded life."

'TOO MUCH DISCLOSURE'

Turning to her other priority, Krawcheck said the brokerage industry has "too much disclosure" that confuses clients because it is larded with minutiae. When she was overseeing Merrill Lynch, she said, she pushed to make relevant disclosures, about conflicts or risks, easily accessible online or in short print form.

Deciding who decides what is relevant remains a big issue, she said. Krawcheck favors another rule being considered by the Financial Industry Regulatory Authority that would require brokers to tell clients the size of any signing bonuses they receive over $50,000 when they move to new firms.

Many brokers and their managers oppose the plan, which Krawcheck said is a telling indicator.

"If it is something you don't want to talk about, we better disclose it," she said.

Krawcheck last month announced that she had bought 85 Broads, a for-profit group founded by former Goldman Sachs employees that encourages "financially empowered" women and their growth within companies. The firm's profits come from membership fees, but Krawcheck said she will canvass members to see if she should expand into other money-making areas.

(For other news from the Reuters Global Wealth Management Summit, click here; Follow Reuters Summits on Twitter @Reuters_Summits; Editing by Nick Zieminski)

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