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The Resource for the Global Finance Profession

More Resistance to SEC Money Fund Proposals from Congress

  • By Jeanine H. Arnett, Director, Government Relations & Policy, AFP
  • Published: 2012-08-08

Immediately before Congress adjourned for their annual August recess, a group of legislators added their names to a long list of individuals and organizations concerned with the rules changes surrounding the money market fund (MMF) reforms that the SEC is rumored to be considering. Members in both the House and the Senate wrote to SEC Chairman Mary Schapiro reiterating the point that American businesses consider all available options when making decisions about investments and fundamental changes to MMF might negatively impact those options.

"For corporations, money market funds also serve as a valuable cash management tool and an important source of credit to fund their operations", wrote a group of nine Members of the House of Representatives. Similarly, a group of Senators wrote, "money market funds play a primary role in providing access to capital markets."

Schapiro is pushing her fellow commissioners toward a vote on tougher rules for the MMF industry as early as August 29. It appears that the SEC staff distributed a 337-page draft proposal to the agency's five-member commission in July, but its details have yet to be made public.]

Schapiro and other top financial regulators from other agencies have remained firm in their stance that money funds are a continuing vulnerability in the U.S. financial system.

AFP has been vocal on this issue and our members have provided formal comments to policy makers to explain the impact that MMF proposals would have downstream on both their investment choices and on their sources of funding. We believe that such changes to MMFs 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.

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All rights reserved.

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