Schapiro: U.S. risk council gave life to money fund reforms
WASHINGTON (Reuters) - Mary Schapiro, the recently departed head of the Securities and Exchange Commission, is crediting the fledgling U.S. risk council with successfully pressuring her former colleagues into proposing new rules for the $2.6 trillion money market fund industry.
Schapiro last year called on the Financial Stability Oversight Council when she failed to persuade fellow commissioners to move forward on revamped rules.
The new super group of regulators, formed by the 2010 Dodd-Frank financial oversight law, used its so-called "name and shame" provision for the first time, a feature that allows it to publicly urge regulators to move forward on rules.
Some Republican current and former commissioners have said the SEC would have introduced new money fund rules without the FSOC's intrusion. The U.S. Chamber of Commerce, a staunch opponent of a crackdown on the industry, also blasted FSOC for trampling on the SEC's turf.
But as the SEC prepares this week to formally propose the controversial reforms, Schapiro told Reuters in an interview that it was FSOC's prodding that made the difference.
"Normally at an agency where the chair doesn't have the votes to do something, the issue just dies. It never gets across the finish line," said Schapiro, who left the agency in December after a four-year tenure.
"I don't think there is any doubt that, but for FSOC stepping in, this issue would have never continued to part of the public debate and discussion," she added. "FSOC kept the issue alive."
The SEC is scheduled to vote on Wednesday on a 700-page plan that seeks to reduce runs on money market funds like those seen during the financial crisis.
Schapiro had hoped to see the rules finished under her watch, and had publicly prodded her fellow commissioners to act on new safeguards such as capital buffers and redemption holdbacks on funds. She also sought to propose a shift from a stable $1 per share net asset value to a floating net asset value.
But three of the commissioners - two Republicans and one Democrat - said they could not support Schapiro's proposal and that they wanted the agency's economists to study the issue first to determine if more reforms were needed.
Frustrated by a lack of action, Schapiro in August called on FSOC.
But some are skeptical of Schapiro's account of why the SEC is now grinding forward on the new reforms.
Paul Atkins, a former SEC Republican commissioner who left in 2008, said Schapiro destructively politicized the process to begin with.
He also said the SEC's proposal is not expected to align exactly with the options the risk council proposed, which Atkins said shows that the agency likely would have put forth rules without prompting from other regulators.
Robert Plaze, a partner at Stroock & Stroock & Lavan LLP and former SEC official who was deeply involved in money market fund reforms, said it is difficult to precisely measure FSOC's influence in this matter, but said it cannot be dismissed.
"At the least, FSOC's involvement made the possibility of dropping further rulemaking much less likely," he said.
(Reporting by Sarah N. Lynch; Additional reporting by Emily Stephenson; Editing by Tim Dobbyn)
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