On January 10, 2011, the Forum submitted its comments on the President's Working Group Report on Money Market Reform. The PWG report raises the possibility of significantly changing the form and nature of money market funds to mitigate systemic risk, offering a number of options for money market fund reforms, ranging from measures that could be implemented by the SEC under its current statutory authority, to more sweeping changes that would require coordination by government agencies, legislative change, and/or the creation of new government chartered private entities:
- Floating net asset values
- Private emergency liquidity facilities for MMFs
- Mandatory redemptions in kind
- Insurance for MMFs
- A two-tier system of MMFs with enhanced protection for stable NAV funds
- A two-tier system of MMFs with stable NAV MMFs reserved for retail investors
- Regulating stable NAV MMFs as special purpose banks
- Enhanced constraints on unregulated MMF substitutes
The Forum's letter reiterates the key role money market funds play in our capital markets, and then discourages the SEC from making radical changes to money market funds, especially without first engaging in careful study of the potential negative consequences of doing so. The letter also notes that the recent significant amendments to rule 2a-7, designed primarily to enhance the risk-limiting constraints and improve the liquidity of the funds, are likely to make money market funds much more resilient in the face of future market disruptions. Further, the letter cautions regulators that approaching the regulation of money market funds with the goal of eliminating (or virtually eliminating) all risk is not fruitful.
The full text of the Forum's comment letter is available here.
The full text of the Commission's release requesting comments is available at: http://www.sec.gov/rules/other/2010/ic-29497.pdf
The full text of the PWG's report is attached to the Commission's release, and is also available at: http://www.treas.gov/cgi-bin/redirect.cgi?http://treas.gov/press/releases/docs/10.21%20PWG%20Report%20Final.pdf