PALM DESERT, Calif – Is the Financial Stability Oversight Council out to undermine the Securities and Exchange Commission’s “role, independence, and democratic process”? Karrie McMillan, General Counsel, Investment Company Institute, seems to think so.

“As you know, last summer, the SEC staff was working on set of proposals for structural reform. A bipartisan majority of SEC commissioners, however, declined to support making those proposals,” said McMillan, kicking off the 2013 Mutual Funds and Investment Management Conference today.

“One reason for their resistance -- a highly commendable reason in my view, was that the SEC, simply put, hadn’t laid the groundwork for the staff’s proposals. Namely, they felt that there hadn’t been enough study of the impact of the comprehensive reforms for money market funds that the SEC had adopted in 2010. As Commissioner Aquilar said at the time, ‘This critical analysis must precede any proposals to further amend our rules.’”

Then-chairman Schapiro got the newly created Financial Stability Oversight Council (FSOC) engaged on the issue of money market funds on the basis that ”otherwise it would have died at the SEC,” according to McMillan.

“At ICI, we viewed this handoff to FSOC with deep concern, and we still do.”

Last November, the agency’s Division of Risk, Strategy, and Financial Innovation released an economic study of what happened with money market funds during 2008, as well as the effectiveness of the 2010 SEC reforms.

“Yet, the FSOC’s actions, despite RiskFin’s study, seemed calculated to undermine the SEC’s role, its independence, and the democratic process at the heart of its approach to rulemaking,” said McMillan.

“As a group of former SEC commissioners and senior staff recently wrote to FSOC, the Council’s intervention ‘could disrupt the long-standing collaborative nature of the [SEC’s] deliberative processes.’”


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