WASHINGTON Jan 27 Money market funds still
remain vulnerable to runs by investors, and should be subject to
further regulation to reduce such risks, one of the newest
members of the U.S. Securities and Exchange Commission said
"More should be done to mitigate the first mover-advantage
enjoyed by investors who run during times of heavy redemptions,"
said SEC Republican Commissioner Michael Piwowar, who spoke
publicly for the first time about his thoughts on money fund
reforms since joining the agency in August.
"There also remains a need to provide investors with more
timely information about funds' holdings, including the value of
those holdings," he added in prepared remarks before the U.S.
Chamber of Commerce.
Piwowar's comments come as the SEC's five commissioners are
weighing a proposal to reduce run risks on money market funds,
like the one seen in 2008 when the Reserve Primary Fund's net
asset value fell below $1 per share as panicked investors yanked
out their money to avoid exposure to Lehman Brothers.
The Chamber has been among the most vocal business trade
groups to lobby against overly strict new rules for money market
funds, saying any regulations that fundamentally alter the
structure of the product could cut off a major supply of
short-term funding for corporations.
In a wide-ranging speech Monday, Piwowar also took aim at
other U.S. regulators who have tried to pressure the agency to
enact new reforms for asset managers and money funds, saying
they should back off and leave it up to the experts at the SEC.
The SEC's proposal contains several regulatory options,
including potentially forcing prime funds used by institutional
investors to float their net asset value and/or allowing fund
boards to impose liquidity fees and redemption gates during
times of market stress.
The Chamber has remained opposed to a floating net asset
value, saying such a drastic change could effectively kill the
The SEC's money fund plan was released in June before either
Piwowar or his Democratic colleague Commissioner Kara Stein had
joined the SEC, making it hard for observers to gauge how the
final plan may shape up.
Piwowar declined to say which option he might support,
telling the audience he is still studying the plan.
The SEC's money fund proposal came about following a bitter
internal feud between the SEC's former Chair Mary Schapiro and
three other SEC commissioners.
The three commissioners at the time, including Republican
Dan Gallagher and Democrat Luis Aguilar, questioned whether more
rules were needed because the agency had already adopted rules
in 2010 that improved fund transparency, tightened credit
quality standards, shortened the maturities of fund investments
and imposed a new liquidity requirement.
In an effort to end the stalemate, the Financial Stability
Oversight Council, a panel comprised of the heads of each major
market and banking regulator, intervened and tried to pressure
The SEC finally issued a proposal, but only after SEC
economists released a study that helped justify further reforms.
Piwowar said Monday he believes the SEC was wrong to cede
ground to the FSOC on money funds.
He also said he was concerned the FSOC has continued to
tread on the SEC's turf by weighing whether to designate large
asset managers such as Blackrock or Fidelity as
systemically important, a tag that carries tough capital rules
and oversight by the Federal Reserve.
He said he has been rebuffed in his efforts to sit in on
some of the biweekly meetings held by the council, and
complained the Federal Reserve exerts too much influence over
"The FSOC, within which the banking and prudential
regulators exert substantial influence, represents an
existential threat to the SEC and the other member agencies," he