Late last week, Vanguard published a Q&A interview with CEO Bill McNabb, where MMFs were a hot topic. Said McNabb: "It's encouraging to see a solution set forth by the SEC on this issue. While some surely will find faults with various provisions, we believe the SEC took a balanced and thoughtful approach. We also believe that a money market fund is a high-quality, low-risk investment option for investors with short-term savings goals. The majority of Vanguard's individual investors who invest in money market funds will not be affected by the new rules. On the institutional side, we will likely see a change in how institutional investors use money market funds with the shift to a floating net asset value (NAV). As we understand it, these investors have time to adapt to these changes, as the compliance date for the floating NAV and fees and gates is a [couple] years out." On FSOC, he said: "There is a big question around whether the Financial Stability Oversight Council, a federal regulatory committee created as part of the Dodd-Frank reform legislation that was enacted in 2010, will designate mutual fund companies like Vanguard as "systemically important financial institutions," or SIFIs. We believe a SIFI designation could have considerable negative effects on Vanguard and our clients, who are working hard to save for retirement and other goals. Among other things, a SIFI designation would, in our view, create a tax of sorts on designated asset managers and would ultimately be a cost burden that fund shareholders may have to bear. We feel strongly that asset managers and mutual funds are already properly regulated by the SEC with extensive investor protections -- in particular those established under the Investment Company Act of 1940. We worry that a SIFI designation could pose a conflict with the "40 Act" by restricting the ability of asset managers to act in the best interest of their shareholders." On July 23, McNabb had more to say on the SEC's most recent reforms. "With these changes, and the significant safeguards it adopted in 2010, the SEC has issued a strong response to those who believe institutional money market funds pose systemic risk.... Vanguard remains confident in the stability of its money market funds, and continues to manage the funds conservatively and with extreme prudence, focusing on the highest-quality short-term money market instruments."

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