Reuters' Kerber writes "Split on money fund reforms driven by asset levels". The article says, "In a rare split, the clubby mutual funds industry is divided over how to backstop the $2.6 trillion kept in money market funds. It is a hot issue after one of the largest funds struggled during the financial crisis and ultimately 'broke the buck,' failing to maintain the $1 per-share net asset value considered sacrosanct by many investors. Regulators have already put tighter rules in place and are considering more, perhaps even doing away with the $1 per share standard and allowing net asset values to "float." Fund companies fear that change would be so drastic it would drive hundreds of billions of dollars away from their products and into traditional bank accounts." The piece quotes Peter Crane, "whose Cranedata.com site follows the industry," "The floating NAV is seen as the biggest threat to money funds as we know them." Reuters says, "Within the industry, however, the dispute is over how much reform is needed to stave off the floating NAV. The fault lines gelled in May when three of the largest managers proposed each money market mutual fund should set aside some extra money for times of trouble, called an 'NAV buffer.' Proponents included Fidelity Investments, the largest money fund operator, plus powerhouses Charles Schwab Corp and Wells Fargo. With each fund maintaining its own buffer, the plan would avoid subsidizing smaller competitors or eroding the appeal of the largest managers as the safest. Most of the industry favors a broader approach that would spread out the risks, however, a plan rolled out in January by trade group the Investment Company Institute and backed by big players like Federated Investors and Vanguard Group Inc, as well as by smaller firms. The plan would feature a "liquidity bank" to buy securities from troubled funds during a crisis, into which all fund families would pay." Finally, Kerber writes, "The fate of all the proposals now lies with the Financial Stability Oversight Council, made up of top financial regulators and charged by Congress with reviewing risks to the financial system. A spokesman for the SEC, leading money fund reviews, said its next steps have not yet been determined."
