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
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
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
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.