One of the Commissioners who opposed SEC Chairman Mary Schapiro’s money market fund reform proposal in August now looks likely to support a floating NAV requirement (one of the reform alternatives proposed by the Chairman). SEC Commissioner Daniel Gallagher has told the press that he “likes” the floating NAV requirement, but wants to “seriously consider coupling it with gating to ensure [the SEC] completely address[es] run risk.” Gating would permit money market fund boards to slow down redemptions to stave off a run and allow the fund manager time to mitigate the concerns of investors who otherwise may be inclined to redeem. Commissioner Gallagher’s support of the floating NAV requirement makes it much more likely that the SEC will move forward with proposing new rules for money market funds in the near future.
In August, three Commissioners – Gallagher, Paredes and Aguilar – had said they would not vote for SEC Chairman Schapiro’s proposed rule on money funds which included two options: (1) floating the NAV and (2) imposing a capital buffer combined with a redemption holdback provision. Commissioners Gallagher and Paredes issued a joint statement at the time stating: “we have carefully considered many alternatives, including the Chairman’s preferred alternatives of a ‘floating NAV’ and a capital buffer coupled with a holdback restriction, and we are convinced that the Commission can do better.”