As we wrote yesterday, comment letters have begun to appear on www.regulations.gov, the website where feedback on the FSOC's recent "Proposed Recommendations Regarding Money Market Mutual Fund Reform" is submitted and posted. Several oddball letters have appeared, but a second legitimate posting, by the Chamber of Commerce, urges the FSOC to allow more time for feedback. The Chamber's letter says, "The U.S. Chamber of Commerce ("Chamber") is the world's largest business federation representing the interests of over three million companies of every size, sector and region. The Chamber created the Center for Capital Markets Competitiveness ("CCMC") to promote a modern and effective regulatory system for the capital markets to promote economic growth and job creation. The CCMC appreciates the opportunity to comment on the Proposed Recommendations Regarding Money Market Mutual Fund Reform ("the Proposal") issued by the Financial Stability Oversight Council ("FSOC" or "the Council") and published in the Federal Register on November 19, 2012."
The Chamber's David Hirschmann writes, "As acknowledged in the Proposal, the potential changes to money market mutual fund regulation could have a significant impact on the how businesses, states, and municipalities manage short-term liquidity -- both as investors and as issuers of short term debt. Money market mutual funds play an important role in the U.S. economy. Many of the Chamber's members rely on these funds both as investment products as well as short-term financing vehicles for their cash management practices. As such, the CCMC supports regulations that strengthen the utility and vibrancy of these funds, including the amendments to Rule 2a-7 that the Securities and Exchange Commission adopted in 2010."
He explains, "The reform concepts included in the Proposal, however, appear to present some harmful consequences to users of money market mutual funds. We hope the FSOC comment process will provide an opportunity for a thorough analysis of the each concept and its corresponding impact on short-term investment and financing for companies, cities, states, as well as the impact on retail investors who rely on money market mutual funds. We also note that the FSOC has requested input on other alternatives that could build on the reforms already implemented, to strengthen the resiliency and safeguard the utility of this valuable cash management product."
The Chamber continues, "Accordingly, and for the reasons outlined below, we are writing to respectfully request that the FSOC extend the comment period an additional 60 days, in order to allow corporate and other users of money market mutual funds the necessary time to provide detailed analysis of the economic and operational implications resulting from the Proposal. Comments on the Proposal are due January 18, 2013. In that regard, the CCMC is concerned that the business community, state and municipal governments, and other stakeholders, will not have sufficient time under the current schedule to thoroughly analyze and comment on the Proposal."
The letter adds, "The CCMC believes that the request for an extension is reasonable and appropriate in light of the present circumstances. First, the Proposal would make fundamental structural changes to money market mutual funds, an important cash management tool for investors, businesses, and state and municipal governments. The Proposal sets forth three different alternative approaches that may have significantly different impacts on investors and parties that receive funding from money market mutual funds and, accordingly, must each be evaluated and analyzed by commenters. The significance of these potential changes cannot be understated, as money market mutual funds provide investors, businesses, and state and municipal governments with the flexibility needed to meet short-term funding obligations and deploy reasonable cash management strategies that support their everyday operations. By playing this critical role in sound financial management, these funds provide the benefits of stability, liquidity, and return. Money market mutual funds represent a major source of funding, owning nearly 40% of corporate commercial paper and more than 60% of the short-term municipal securities outstanding today. This source of financing is vital for businesses to meet their working capital needs and for state and local governments to fund critical infrastructure projects. No alternatives with the same multiple benefits are available to replace money market mutual funds."
The Chamber says, "Second, the comment period falls during a time when many of the corporate and state and local treasurers and other finance officials who will be dealing with the consequences of new money market mutual fund regulation will be busiest -- year end. Treasurers and other finance officials are working to ensure adequate financing is in place for their respective companies and municipalities, improvements to cash balances on companies' financial statements are made by calendar year-end, and that books are closed within weeks of year end. The fourth quarter is also a time when many companies' annual budgets must be finalized. Further, many state and local governments are in the throes of administration changes after last months' election. Therefore, the time constraints of the comment period may severely impair the ability of interested parties to study and comment on the Proposal."
The letter tells us, "Finally, because the Council provided only a cursory economic analysis of the impact of the proposed changes to investors and issuers, and failed to adequately explain the many assumptions that it used, it is incumbent on stakeholders to fill the void and provide data necessary for the Council to perform the requisite analysis. Some of the options included in the Proposal will require significant information technology changes to treasury workstations and accounting systems, as well as development, testing, and implementation of clearing systems that would feed fund data to institutional investors. As such, stakeholders will need adequate time to consult with third parties to assess the costs and time needed to implement the options outlined in the Proposal in order to have the ability to provide fully considered comments to the Council."
Finally, the Chamber writes, "For these reasons, the CCMC respectfully requests that FSOC extend the comment period to respond to the Proposal by an additional 60 days. Given the scope and complexity of the Proposal and the impact that this Proposal -- if implemented -- could have on the economy, we believe that this request is reasonable and appropriate. We thank you for your consideration of this request and would be happy to discuss these issues with the Council."
