McMillan

Investment Company Institute general counsel Karrie McMillan said Monday she’d be willing to sit down and talk with Securities and Exchange Commission member Elisse Walter about money market mutual fund reform.

“I find it very interesting that she’s open to ideas,’’ McMillan said, after the commissioner said the regulatory agency wanted the fund industry to ‘re-engage’ in discussing reform of the money market mutual fund business.

Walter said that the SEC was still considering options other than floating the net asset value of such funds from $1 a share or mandating capital buffers with some sort of limit on withdrawals – two proposals McMillan decried earlier Monday as ‘outrageous.’

A few other options, Walter said, include:

A liquidity or redemption fee

A two tier-system, where retail investors choose between floating or stable NAV funds and institutions could be limited to a floating NAV

Mandatory redemptions ‘in kind’

Insurance

Private emergency liquidity facilities

Funds at special purpose banks

That rundown of options came after Walter chastised for its ‘abrupt end’ to dialogue with the SEC at the end of 2011. She said the debate on money market reform had devolved into “a public volley of slogans,’’ with no attempt at a “meeting of minds.’’

McMillan said after Walter’s speech that “we were under the impression that the SEC was under pressure to get something done” at the end of 2011 and was, at that time, not prepared to take more time to discuss the reform.

In 2010, for instance, Walter noted that the SEC clearly indicated with a first round of reform of the funds that a second round was coming.

McMillan said she would be willing to sit down, along with other ICI staff or industry members, and talk with Walter about possible approaches to that next round of reform.

The reforms were precipitated by the “breaking of the buck” in 2008, when the Reserve Primary Fund said it no longer could support a stable $1 a share value in its money market fund.

That led to a $300 billion run on money market funds in three days and massive government intervention, to prop up the industry.

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