House to Hold Hearing on MMF Reform
The U.S. House of Representatives' Committee on Financial Services will hold a hearing Wednesday at 10:00 a.m. on "Examining the SEC's Money Market Fund Rule Proposal." The description says, "This will be a one-panel hearing with the following witnesses: The Honorable Steven N. McCoy, Treasurer, State of Georgia, on behalf of the National Association of State Treasurers; The Honorable Sheila Bair, Chair, Pew Charitable Trusts, Systemic Risk Council; Ms. Marie Chandoha, President and Chief Executive Officer, Charles Schwab Investment Management Inc.; Mr. James Gilligan, Assistant Treasurer, Great Plains Energy, on behalf of the U.S. Chamber of Commerce; and Mr. Paul Schott Stevens, President & CEO, Investment Company Institute. This hearing will review the proposal put forth by the Securities and Exchange Commission (SEC) on June 5, 2013, to further reform the regulation of money market mutual funds (MMFs). Among the reforms proposed is a requirement that "prime" MMFs adopt a "floating" net asset value (NAV) per share instead of a stable $1.00 share price and a proposal to allow MMF directors to impose liquidity fees and redemption gates in times of market stress. "Prime" MMFs invest in high-quality, short-term instruments issued by corporations and banks, as well as repurchase agreements, certificates of deposit, and asset-backed commercial paper. By contrast, "government" MMFs invest in obligations of the U.S. government, the U.S. Treasury or federal agencies and instrumentalities, as well as repurchase agreements collateralized by government securities. During the financial crisis, "prime" MMF experienced heavy redemptions while "government" MMFs experienced heavy inflows."
