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Commissioner Piwowar Shares Views on Money Market Fund Reform

In a recent speech at the U.S. Chamber of Commerce, SEC Commission Piwowar discussed his philosophy regarding his work as SEC Commissioner and expressed concern about the current regulatory regime overseeing the financial markets.  He outlined five items that he believes the Commission should undertake in order to advance the core mission of the agency, including: conducting a comprehensive review of equity market structure, establishing a pilot program to test alternative tick sizes for some capitalization companies, developing incremental fixed-income market structure changes, moving forward with initiatives to curb over-reliance on proxy advisory firm recommendations, and conducting a retrospective analysis of the Commission’s rules in compliance with an Executive Order issued by President Obama. 

Commissioner Piwowar also identified two threats that stand in the way of accomplishing the SEC’s mission – special interests “that are trying to co-opt the SEC’s corporate disclosure regime” and “banking regulators trying to impose their bank regulatory construct on SEC-regulated investment firms and investment products.”  He expressed his frustration over the denial of his requests to attend FSOC meetings as a “non-participating guest,” particularly in light of the fact that multiple people from the Federal Reserve attend the meetings.  He also spoke about the recent OFR study on the financial management industry with disdain, and stated that he believes the SEC, along with the public, should be heard before any further study or action is taken – particularly in light of the fact that most of the asset management firms are SEC-regulated.

Finally, Commissioner Piwowar addressed the SEC’s “wholesale abdication” of its responsibility for money market fund reform to the FSOC.  Rather than seeing runs on money market funds that in turn cause banks to fail when they are unable to roll over short term funding as “structural vulnerabilities” of those products, Commissioner Piwowar identified banks’ over-reliance on short-term funding as the real systemic issue that banking regulators should address.  He went further, saying that instead of interfering with the SEC’s jurisdiction with regard to securities regulation, the FSOC should identify financial threats to U.S. financial stability by designating the Federal government, Federal Reserve, and Basel Committee on Banking Supervision as SIFIs.

He closed the speech by sharing his views on money market fund reform.  He stated that while the 2010 reforms were helpful, they alone were not sufficient because they did not address the “first mover-advantage enjoyed by investors who run during times of heavy redemptions” nor did they provide investors with more timely information about money market fund holdings or the value of those holdings.  While he identified what he sees as the remaining outstanding issues for money market funds, he had “not reached any conclusions on which alternatives in the Commission’s outstanding rule proposal best address these investor protection concerns while preserving the benefits for money market funds for investors and the short-term funding markets.”