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.”