ICI Continues Correction Spree
The Investment Company Institute's Mike McNamee posted his fourth "Viewpoint" in as many days. The latest is entitled, "Correcting the Record: Investor Protections in the SEC's 2010 Money Market Fund Reforms," which says, "We've said it before, and we'll say it again: One of the most puzzling aspects of regulators' campaign for changes to money market funds is their ability to ignore the dramatic improvements in these funds resulting from the regulatory reforms that the Securities and Exchange Commission (SEC) enacted in 2010. Six months before Congress passed the Dodd Frank Act, the SEC became the first agency to address any of the financial products hit by the crisis, passing a package of sweeping changes to tighten regulation and make money market funds more resilient. For more than a year, those reforms have been tested by the ongoing European debt crisis, the standoff over the U.S. debt ceiling, and the historic downgrade of the U.S. credit rating -- and money market funds have emerged strong. To her credit, SEC Chairman Mary Schapiro acknowledges that "the 2010 reforms were extremely positive." But at the same time, her public statements -- including her latest testimony before the Senate Banking Committee -- frequently downplay and undercut those very reforms. Take today's example: Misstatement: "I don't think [the 2010 SEC amendments] address the unfair results that can occur when a sophisticated institutional investor gets out quickly and losses are concentrated with retail investors, or retail investors are left in a frozen fund and can't access their liquidity." Actually, the SEC's 2010 amendments address exactly this situation. First, the healthy liquidity that the amendments require money market funds to hold sharply reduces the odds that a fund will become "frozen." As we've noted, liquid assets held by prime money market funds today are twice as great as the outflow from such funds in the week that Lehman Brothers failed in September 2008. Second, these reforms, for the first time, give money market fund boards of directors the power to assure a fair and orderly liquidation of a troubled money market fund, should that be necessary."
