Monday, March 15, 2010
Excerpt from Speech by SEC Commissioner Luis Aguilar, Making Sure Investors Benefit from Money Market Fund Reform, Investment Company Institute and Federal Bar Association Mutual Funds and Investment Management Conference, Phoenix, AZ, March 15, 2010:
Potential Further Action
Notwithstanding the substantial reform recently made as to Rule 2a-7, more may be in the works. Besides what may be contained in the pending money market fund report by the President’s Working Group on Financial Markets, the Chairman as well as senior staff at the Commission have telegraphed a desire to see more fundamental structural change in the money market fund industry. In particular, the staff is examining the merits of a floating, mark-to-market NAV for money market funds, rather than the stable one-dollar price. Other ideas under consideration include real-time disclosure of the shadow price; mandatory redemptions-in-kind for large redemptions (such as by institutional investors); a private liquidity facility to provide liquidity to money market funds in times of stress; and a possible "two-tiered" system of money market funds, with a stable NAV only for money market funds subject to greater risk-limiting conditions and possible liquidity facility requirements, among others.
I believe that any consideration of future reforms should be careful not to jeopardize the tremendous value money market funds bring to investors. As the Commission considers further money market reform, I believe two fundamental priorities must be at the forefront of our consideration. The first priority should be to recognize that money market fund investments have historically worked well for all investors, particularly for retail investors. All contemplated proposals should take retail investors into account and make sure that they are able to continue to participate and benefit.
In addition, any further reform should not be so “transformational” that the money market fund is no longer an economically attractive product. Future proposals should be rigorously analyzed to determine the consequences that would result. One consequence no one wants to see is a flight of trillions of dollars to unregistered vehicles that have no regulatory oversight or accountability. As a second round of reform is contemplated, there needs to be serious consideration given to what other reforms should be made regarding unregistered vehicles to insure that there is no regulatory end-run