(Adds details on letters from U.S. senators)
By Sarah N. Lynch
WASHINGTON, July 15 A top U.S. securities
regulator raised doubts on Tuesday on whether his agency will
adopt rules requiring prime money market funds to float the
value of their shares, saying deliberations are ongoing and that
he opposes a key element of the plan.
"There is a question on whether we are going to move forward
on a floating (net asset value)," Michael Piwowar, a Republican
member of the Securities and Exchange Commission, told reporters
on the sidelines of an event at the American Enterprise
"We are still in discussions. ... The commission is still
trying to work to formulate what the final version of the rule
will be," he said, noting that it "may" or "may not" contain a
Piwowar's comments come as the SEC is putting the finishing
touches on a rule aimed at reducing the risk of investor runs on
money market mutual funds similar to what occurred in the 2008
The SEC's proposal contains several options. It would
require prime institutional funds to shift from a stable, $1 per
share net asset value to a floating net asset value. It also
would permit fund boards to impose "gates" on redemptions and
charge liquidity fees in times of stress.
The SEC could opt to adopt one of the two plans, or adopt
them in combination.
A person familiar with the matter told Reuters last week
that the SEC was eyeing July 23 as a possible date for a vote
and that it was leaning toward adopting a rule that combines the
Piwowar declined to confirm the date or how the rule may
But he said he cannot support a floating net asset value in
its current form because it would require floating shares to be
rounded to the fourth decimal place -- something he said is out
of line with current market practice.
"We don't require that on any other mutual fund. It makes
absolutely no sense to me," he said, adding that he would
support a stand-alone plan for fees and gates.
Many in the money market fund industry have expressed
reservations against a floating net asset value amid concerns it
could kill such funds.
The fears are partly driven by how the switch to a floating
net asset value would trigger certain tax rules.
Funds with a stable $1 per share NAV do not generate gains
or losses, but a floating share price would force investors to
track tiny gains and losses on a routine basis for tax
A failure to reach a workable solution could pose a wrinkle
for the SEC, because some commissioners have said the tax issue
must be fixed in order for them to support a floating NAV.
The U.S. Treasury has yet to announce a proposal to address
the tax concerns.
Piwowar said on Tuesday he is "aware of a particular fix"
that is in the works, but declined to provide details, saying he
did not wish to "front run" the Treasury.
Late on Tuesday, U.S. Senator Pat Toomey, a Pennsylvania
Republican, and Senate Banking Committee Ranking Republican Mike
Crapo separately sent letters to Treasury Secretary Jack Lew
urging him to hurry up and release guidance for how tax rules
might work for a floating net asset value.
"If a floating net asset value does become a part of any
final rule, tax, accounting and compliance issues need to be
resolved ahead of time," Crapo wrote.
A Treasury spokeswoman confirmed receiving the letters and
said the department would respond.
(Reporting by Sarah N. Lynch; Editing by Leslie Adler)