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Crane 100 Money Fund Index
Reed Smith's Stephen Keen writes "FSOC and Money Market Fund Reform: A Path to Nowhere"
. The publication says, "In a letter (the "Geithner Letter"), to the members of the Financial Stability Oversight Counsel ("FSOC"), Treasury Secretary Geithner started the next round of debate over subjecting money market funds to further regulatory reforms
. In the aftermath of SEC Chairman Schapiro'
s announcement that "a majority of the Commission ... will not support a staff proposal to reform the structure of money market funds
", Secretary Geithner asked FSOC "to consider taking a series of additional steps to address this challenge
." He characterized these steps as a "
path forward to protect investors and the economy." This client alert discusses each of the steps the Geithner Letter urged FSOC to take, and why these steps will probably not lead to the structural reform of money market funds
." After a lengthy discussion, Keen concludes, "We have shown that FSOC cannot implement structural reforms to money market funds by itself
. While FSOC can recommend structural reforms to the SEC under section 120, unless the composition of the SEC changes, this is apt to be a protracted path to the same end as Chairman Schapiro'
s failed attempt at reforms. The other viable alternative is to designate funds or their managers as SIFIs. This is a convoluted path, however, that would ultimately lead to a court battle that may include a serious constitutional challenge to FSOC'
s designation powers. Either path will probably take more than a year to traverse, with no certain end. This is why the Geithner Letter represents a continuation along paths that will probably not lead to successful money market fund reforms