SEC Commissioner Luis A. Aguilar, the swing vote that put a halt to Chairman Mary Schapiro’s plans for money market regulatory reform, said in a statement issued on Thursday that the agency should look at the “cash management industry as a whole” instead of zeroing in only on money market funds.
“I am, and continue to be, supportive of the Commission putting forward a thoughtful and deliberative concept release that asks serious and probing questions about the cash management industry as a whole to diagnose its frailties and assess where reforms are required. This release should include all pooled cash management mechanisms so that the Commission is knowledgeable about how trillions of dollars are managed and understands how this money is able to move from the regulated, transparent money market fund market to the opaque, unregulated markets,” said Aguilar, a former attorney for Atlanta-based fund manager Invesco.
He added: “I remain concerned that the Chairman’s proposal will be a catalyst for investors moving significant dollars from the regulated, transparent money market fund market into the dark, opaque, unregulated market. Currently, in addition to all the prescriptive conditions applicable to SEC-registered money market funds, these funds are also highly transparent to investors and regulators in a way that other cash management vehicles are not. Many large investors in SEC-registered money market funds have made this point, and they have emphasized that the mere publication of this SEC proposal would be the trigger for the movement of monies. Such transfers could cause significant damage to the country’s short-term capital markets.”
Aguilar said a section of the concept release should be focused on the effectiveness of the SEC’s 2010 money market amendments. “A critical analysis must precede any proposals to further amend our rules,” he said.
The Commissioner added that the SEC rushed to act on a money market regulatory reform proposal, and the credibility of a list that the SEC staff complied of 300 money market funds that received sponsor support is questionable. “This demands more time to sort out the facts,” he said.