By Sarah N. Lynch
WASHINGTON Dec 5 The U.S. Securities and Exchange Commission's staff has completed a study looking at whether rules implemented in 2010 were enough to shore up the $2.6 trillion money market fund industry, SEC commissioner Luis Aguilar said on Wednesday, without providing any of the findings.
Aguilar, a Democrat, and his two Republican colleagues on the SEC requested the study after they refused to vote for a series of money market fund proposals championed by outgoing SEC Chairman Mary Schapiro.
The three wanted a study done first to determine whether rules implemented in 2010 were enough to prevent future runs on funds like the one experienced during the 2008 financial crisis.
During the crisis, heavy exposure to collapsed investment bank Lehman Brothers caused the Reserve Primary Fund's net asset value (NAV) to fall below $1 per share, or "break the buck" in industry parlance.
Aguilar, in an emailed statement, did not provide details of the 93-page study's findings, which were delivered to commissioners on Friday.
He did say that the study tackles one of his primary concerns - that major structural changes to money funds could give rise to a migration into an "unregulated market."
He said he was assured the SEC's staff was actively considering the issue.
In an interview with Reuters on Wednesday, Aguilar said the commission still needs to take a vote to release the report because it contains some non-public information. He said he is "prepared to vote to have it declared public," and he thinks a majority of his colleagues will agree.
Since last year, Schapiro has been calling for a new round of reforms to the money market fund industry.
Although the SEC implemented a series of reforms in 2010, she has said those do not go far enough to prevent runs.
Earlier this year, she circulated a draft proposal to SEC commissioners that contained several options for new measures. The leading option called for capital buffers coupled with redemption limits during periods of stress.
A second option called for moving from a stable $1 per share net asset value to a floating NAV, so that investors would not get spooked by the prospect of funds breaking the buck.
But Schapiro could not muster support from Aguilar, or commissioners Troy Paredes and Dan Gallagher.
Moreover, the industry and corporate treasurers attacked her plan, saying it could kill money market fund products.
In publicly rejecting Schapiro's proposal, Aguilar said at the time he was concerned Schapiro's plan "will be a catalyst for investors moving significant dollars from the regulated, transparent money market fund market into the dark, opaque unregulated market."
Following the defeat of Schapiro's plan in August, the U.S. Financial Stability Oversight Council recently decided to take up the issue in an effort to pressure the SEC to come to a consensus on new reforms.
Last month, the FSOC rolled out a framework of new rules that largely mirror the plan championed by Schapiro.
It is collecting comments on the draft, which discusses the various regulatory approaches and also raises the concerns that Aguilar has posed about a move into unregulated markets.
If the SEC refuses to act, then the FSOC could formally present its recommendations, which would force the SEC to agree to them, or reject them in writing within 90 days.