Late Tuesday, Bloomberg wrote an article entitled, "SEC Money-Market Rule Said to Include Capital, Floating Shares". It says, "The U.S. Securities and Exchange Commission has been presented with a 337-page staff proposal that would require the $2.5 trillion money-market fund industry to float share prices or hold more capital and curb redemptions, according to a person familiar with the proposal. SEC staff delivered the measure to the commissioners yesterday afternoon, two people said. It closely tracks with provisions SEC Chairman Mary Schapiro outlined in testimony last week before the Senate Banking Committee and includes multiple questions for the public, the people said."
The Bloomberg piece continues, "SEC members could meet as soon as next month to vote on sending the proposal for public comment. The agency would have to hold another vote before completing the rule. Schapiro might not have enough support on the commission to advance the measure. The two Republican commissioners, Troy Parades and Daniel Gallagher, are opposed to additional regulation for money-market funds and Luis Aguilar, a Democrat, has expressed concern about the impact on the industry of changes in money-market fund rules."
Reuters also wrote last night, "SEC staff floats draft proposal on money funds". It says, "Top officials at the U.S. Securities and Exchange Commission are reviewing a draft proposal for controversial new reforms for the $2.6 trillion money market fund industry, according to people familiar with the matter. The draft proposal, which was formally circulated among commissioners late on Monday, outlines SEC Chairman Mary Schapiro's vision for adding safeguards to the money market funds, one of those people said. Schapiro contends those funds are still susceptible to runs, despite some reforms already put in place after the 2007-2009 financial crisis."
The article continues, "The new safeguards are strongly opposed by the fund industry and the Chamber of Commerce. Three of the SEC's five commissioners have also publicly expressed skepticism about the need to adopt additional money market reforms beyond the ones enacted in 2010. The draft proposal is largely similar to what has already been publicly discussed by Schapiro in speeches to the industry and in testimony before Congress."
It adds, "The proposal contains two potential plans. One involves the combination of a capital buffer coupled with a holdback on redemption requests by investors. The other, meanwhile, consists of a floating net asset value -- a move that aims to curb investor complacency over the stable $1-per-share value that funds currently quote. The commissioners are being given 30 days to review the draft proposal, those people said, but it is unclear whether Schapiro may call a vote on the plan because she is still trying to gain support for it. She will need three votes from the five-member commission if she hopes to put it out for public comment."
