SEC Commissioner Luis A. Aguilar yesterday responded to Chairman Mary L. Schapiro’s statement regarding the apparent lack of votes for the Commission to issue a proposal on a new round of structural money market mutual fund reforms. Commissioner Aguilar expressed support for a concept release on further money fund reforms, but raised questions about the potential impact a proposal focused on just one segment of the money markets may have given current economic conditions.
Said Commissioner Aguilar: “The cash management industry is a large industry that includes many pooled vehicles exempted from registration and largely excluded from regulatory oversight. There are larger macro questions and concerns about the cash management industry as a whole that must be considered before a specific slice of that industry — money market funds — is fundamentally altered. To move forward without this foundation is to risk serious and damaging consequences in contravention of the Commission’s mission.”
Specifically, Commissioner Aguilar noted that a concept release would allow for an opportunity to study the entirety of the cash management industry as well as to study the effectiveness of the Commission’s 2010 money market reforms. The commissioner also observed that questions have been raised about the accuracy of a list of 300 money funds identified by Commission staff that may have received sponsor support during the last several decades. A concept release would provide an opportunity to conduct rigorous data analysis of money markets to inform a future reform proposal.
Commissioner Aguilar also expressed concern that the “mere publication” of a money fund reform proposal may cause investors to move large sums from regulated, more transparent money market funds to unregulated and less transparent corners of the money markets. Some large investors have cautioned against moving too quickly to bring about further money fund reforms. According to Commissioner Aguilar, “[s]uch transfers could cause significant damage to the country’s short-term capital markets.”