Industry claims victory in US battle
August 27, 2012
Following months of concentrated backlash from the industry, Mary Schapiro, chairman of the US Securities and Exchange Commission, last week said the agency had abandoned plans to reform the $2.6tn money market fund industry. Opponents of the reforms say their fight is far from over.
Ms Schapiro announced the decision just a week before the agency was due to vote on the proposals, which included reforms that would either force funds to abandon their cherished fixed $1 share price and adopt a variable net asset value structure, or restrict liquidity by requiring funds to set aside a capital buffer, possibly combined with restrictions or penalties on withdrawals.
The campaign against money market fund reform, industry veterans say, has been unprecedented. After the SEC circulated early drafts of the proposals in January, major fund sponsors and industry groups such as the Investment Company Institute and the Coalition of Mutual Fund Investors, as well as 33 members of Congress, said these reforms would wipe out the industry entirely and cause states, municipalities and a myriad of businesses to be deprived of a major funding source.
Federated Investors threatened a lawsuit to block any reforms. In April, the US Chamber of Commerce unleashed a “station domination ad buy” inside Washington’s Union Station Metro stop – the closest Metro station to the SEC offices – calling for money market funds to be left alone.
Charles Schwab bought a full-page ad in the Wall Street Journal and USA Today, arguing that the “campaign to scare owners of money fund shares is neither accurate nor wise”.
“I have been practising law in the investment management area for over 30 years and have not seen this level of contentiousness,” says Barry Barbash, partner at Willkie Farr & Gallagher and a former director of the SEC’s division of investment management.
Inside the SEC, commissioner Luis Aguilar, a former mutual fund executive viewed as the swing voter, said he opposed the proposals too.
Read more here.