John V. Murphy, Chairman of OppenheimerFunds Inc. gave the "ICI Chairman's Address" at this year's 2009 General Membership Meeting. Murphy discussed money market funds, saying, "Another area where ICI has brought its resources to bear is the debate over money market funds. As you know, more than a year into the credit crisis, and after an unprecedented series of events, the Reserve Primary Fund became only the second money market fund in history to 'break a dollar' last September."
He continues, "In November, ICI's Executive Committee formally chartered a Money Market Working Group, led by Vanguard's Jack Brennan, to address questions about how the money market operates and how money market funds should be regulated. They faced a daunting challenge. They needed to preserve the features that make money market funds so valuable to investors, to issuers, and to the economy. But they also needed to make funds more resilient, to better withstand even the most adverse market conditions."
Murphy says, "The Brennan Report literally 'writes the book' on money market funds -- and draws the blueprint for the future of this vital product. It offers new and heightened standards for the operation of money market funds in every key area -- including liquidity, credit quality, maturity, client concentration, and transparency. As these recommendations are adopted by the industry, tomorrow's money market fund investors will face even less risk than today's do."
"The Working Group also considered proposals made by others that would fundamentally alter today's money market funds -- ideas such as floating funds' net asset value, or requiring insurance, or converting money market funds into special-purpose banks. In each case, the group concluded that these ideas are impracticable and could hurt investors, issuers, and other participants in the money market," he adds.
Murphy says, "The Brennan Report's recommendations have been well received. Without endorsing the report, SEC Chairman Mary Schapiro and Treasury Secretary Timothy Geithner have both called for strengthening the regulatory framework for money market funds. They cited the same areas -- credit quality, liquidity, and mitigating the risk of a run -- that the Working Group focused on. The SEC has indicated that it will come forward with a package of proposals soon, and we look forward to working with them on it."
Finally, he says, "But we're not just waiting around. Members of the Working Group committed to move ahead voluntarily on those proposals that can be implemented without regulatory action. And ICI's Board of Governors called upon all money market funds to do the same. Reports from our members indicate that they are moving rapidly to implement these proposals."
Vanguard's Brennan is scheduled to lead a panel Friday that will touch on money funds, and SEC Chairman Mary Shapiro is also scheduled to speak.
