The Chairman and Vice Chairman of the House Financial Services
Committee have sent a strongly worded letter to U.S. Securities and
Exchange Commission (SEC) Chairman Mary Schapiro urging her and the
agency's commissioners to refrain from making additional rule
changes to money market funds (MMFs).
In the April 17
letter, Chairman Spencer Bachus (R-AL) and Vice Chairman Jeb
Hensarling (R-TX) point out that the SEC has already missed a
number of rulemaking deadlines under Dodd-Frank and question
whether the agency has performed a cost benefit analysis
substantial enough to warrant additional rules at this time.
The Committee leaders urged Chairman Schapiro in their letter to
"first determine whether further reforms to money market funds are
needed before choosing among the various reform proposals that are
reportedly under consideration." Their position underscores AFP's
longstanding stance that the Dodd-Frank rules instituted in 2010
were significant changes that will, on their own, substantially
reduce the liquidity concerns and systemic risks posed by MMFs. AFP
also believes the SEC should allow the rules to serve their
intended purpose before instituting any additional rules, which
would likely eliminate MMFs as a viable investment alternative for
many corporate investors.
Since the release of the MMF rule changes nearly two years ago,
AFP has been vocal with our concerns regarding the option to
eliminate the stable NAV in favor of a floating NAV, and we have
been clear on our opposition to this idea. Such a change would
greatly reduce investors' interest in utilizing MMFs as a cash
management and investment tool, whether applied to all investors or
just institutional investors. For purchasers of MMFs, the return of
principal is a much greater driver of the investment decision than
return on principal. For a large number of institutional investors,
the potential of principal loss would preclude floating NAV MMFs
from being an internally approved investment alternative.
To learn more about AFP's position on MMFs, visit the Money
Market Fund Resource page at www.afponline.org/moneyfunds.