By Sarah N. Lynch
WASHINGTON, May 3 (Reuters) - The top U.S. securities
regulator remained tight-lipped on Friday about the details of
her agency's efforts to craft reforms for money market funds,
probably disappointing an audience of fund industry executives
who gathered in Washington for an annual conference.
In her first major speech since taking the helm of the U.S.
Securities and Exchange Commission 18 days ago, Chair Mary Jo
White said the agency's proposal would "preserve the economic
benefits" of the product, while still addressing the potential
for runs that could harm retail investors.
But that was as far as she would go.
"While I'm sure that you would like me to say more about
this today, I'll stop," she said in her speech to the members of
the Investment Company Institute, the major trade organization
for the fund industry.
"The staff and commissioners are actively engaged in
discussions designed to yield an appropriate and balanced
proposal in the near future."
Since last year, the SEC has been struggling to come to an
agreement on how to craft new reforms aimed at the roughly $2.6
trillion money market fund industry.
Former SEC head Mary Schapiro had sought support for reforms
she said would prevent runs on funds like the one experienced in
2008, when heavy exposure to collapsed investment bank Lehman
Brothers caused the net asset value of the Reserve Primary Fund,
a large money market fund, to fall below $1 per share, or "break
Schapiro had pushed for two potential approaches. One called
for capital buffers coupled with redemption hold-backs. Another
suggested moving from a stable $1 per share net asset value to a
floating NAV, so that investors would not get spooked by the
prospect of funds breaking the buck.
But the two proposals met fierce opposition from the
industry's major funds as well as the ICI and the U.S. Chamber
of Commerce, all of which warned that the proposals would
effectively kill the product.
Schapiro's proposal also left the SEC gridlocked, with three
of its five commissioners refusing to support her plan until the
agency's economists completed a study to determine if more
reforms were needed.
After the three commissioners declined to vote for
Schapiro's proposal last August, the U.S. Financial Stability
Oversight Council decided to take up the issue to pressure the
SEC to come to a consensus on new reforms.
Schapiro left the SEC in December, but the agency has
continued trying to work toward a solution that can reach a
Although the industry still opposes a floating NAV, some
large players, including Charles Schwab Corp, have
signaled they could live with a scaled-back approach in which
only prime funds for institutional investors would be required
to move from a stable to a floating NAV. [ID: nL1E9CHINY]
On Thursday, the Wall Street Journal reported that SEC staff
members were discussing the industry's middle-of-the-road
proposal to target only prime funds, citing people familiar with
On the sidelines of Friday's event, White declined to
comment when reporters pressed her for details on how the
reforms may look.
"It's an ongoing process internally," she said. "I think
we've said what we can say."
Ever since the first effort to craft money market fund
proposals failed last year, the SEC has been careful to keep its
negotiations on money market reform under wraps.
White, for her part, has remained coy about her policy views
generally since she was tapped for the top SEC post.
She did tell the audience, though, that she expects the
final product to take different viewpoints into account.
"I am confident that the ultimate result of this process
will take into account the views of commissioners who vary in
background and perspective, but share the goals of protecting
investors and promoting market efficiency and capital
formation," she said.