SEC's Investor Advisory Committee to Discuss MMF and NAV Issue

See AFP's Money Market Resource www.afponline.org/moneyfunds

The Investor Advisory Committee of the SEC will hold a May 17 public meeting to discuss, among other important topics, the SEC's recent proposal on money market funds (MMF) and the net asset value (NAV) issue, including a presentation that will be given by SEC staff.   The public meeting is set to begin at 9:00 am with a 45 minute MMF/NAV discussion at 2 pm. 

Interested members may watch a simultaneous webcast on the SEC's website, www.sec.gov.

AFP's Government Relations Committee (GRC) previously had issued a comment letter to the SEC opposing the elimination of the stable NAV in favor of a floating NAV. AFP believes the introduction of a floating NAV would greatly reduce investors' interest in utilizing MMFs as a cash management/ investment tool.  AFP stated that for purchasers of MMFs, the return of principal is a much greater driver of the investment decision than return on principal. Likewise, for a large number of institutional investors, the potential of principal loss would preclude MMFs with a floating NAV from being an approved investment alternative.

The Investor Advisory Committee (IAC) was formed by the SEC in 2009 to give investors a greater voice in the commission's work. The ICA's charter provides for a broad scope of interest, including:

• Advising the Commission on matters of concern to investors in the securities markets
• Providing the Commission with investors' perspectives on current, non-enforcement, regulatory issues
• Serving as a source of information and recommendations to the Commission regarding the Commission's regulatory programs from the point of view of investors

As a result of their initial meeting, the ICA created three subcommittees to address issues it deemed important to their mandate.  Three subcommittees are:

1. Investor as Purchaser Subcommittee
2. Investor as Shareholder Subcommittee
3. Investor Education Subcommittee 

 An Investor as Purchaser Subcommittee is chaired by Mercer Bullard (Founder and President of Fund Democracy, Inc. and Associate Professor of Law, University of Mississippi School of Law).  This subcommittee examines the needs of investors when they purchase specific products (mutual funds, hedge funds, MMFs) and services (brokerage, investment advisory, and financial planning). This subcommittee also considers the fiduciary duty owed to investors by those who provide investment advice, as well as issues related to pre-sale and other disclosure, intermediary fees and compensation practices, arbitration, and technology.

An Investor as Shareholder Subcommittee is chaired by Stephen Davis, who is the executive director of Yale School for Management's Millstein Center for Corporate Governance and board member of Hermes Equity Ownership Service.  This subcommittee reviews proxy solicitation and disclosure issues, proxy voting and process (including the role of proxy advisory firms), majority voting, Regulation FD, executive compensation practices, the responsibilities of shareholders, international issues, and technology related to shareholder communications and voting.

An Investor Education Subcommittee is chaired by Dallas Salisbury, president and CEOat the Employee Benefit Research Institute.  This subcommittee focuses on matters related to financial literacy, the efficacy of layered educational resources that may permit investors to access information at varying levels of detail reflecting their needs, the ways that issuers and boards of directors communicate with investors, and the types of technology that can be utilized for education.

AFP's Government Relations Committee is carefully following this committee's actions, including those of the subcommittees and those of the SEC, as this issue is viewed as highly important to AFP members. Contact Salome Tinker sjtinker@afponline.org with questions.