Vanguard's Gus Sauter on NRSROs
Vanguard's Gus Sauter writes in the company's comment letter on NRSROs, "We appreciate the opportunity to provide our comments to the Securities and Exchange Commission on the proposal to remove credit ratings from Rule 2a-7.... [We] are deeply committed to working with the Commission to seek regulatory solutions that will increase investor protection, strengthen investment standards, and diminish risk to the $2.7 trillion money market fund industry. We do not believe, however, that the removal of credit ratings from Rule 2a-7, and the proposed replacement standards of credit-worthiness, promote these goals. As Vanguard has stated in response to previous proposals by the Commission, we believe that credit ratings provide a valuable, independently established baseline for money market fund investments. The Dodd-Frank Act requires the Commission to replace credit ratings with 'to the extent feasible, uniform standards of credit-worthiness.' We believe the Commission's proposed credit standards may not adequately replace this baseline, and therefore, fail to achieve the stated goal of Congress. The replacement of the minimum, objective floor for eligibility under Rule 2a-7 with a subjective standard has the potential to create different standards of credit-worthiness. As a result, we urge the Commission to consider other alternatives, such as the one set forth in this letter, that may more effectively replace the objective standard provided by credit ratings and achieve Congress' goal of uniformity."
