Marie Chandoha, president, Charles Schwab Investment Management, has a few choice words for International Organization of Securities Commissions on its recently released Consultation Report, “Money Market Fund Systemic Risk Analysis and Reform Options.”
In her comment letter to the Securities and Exchange Commission, Chandoha said the report was “troubling” because of its premises that: money market funds are dangerously susceptible to runs; they are somehow more systemically risky than the global banking system; there is a presumption that more regulation is needed, despite the lack of empirical evidence.
According to Chandoha, money market funds “are one of, if not the, safest investment options in the market today, with an incomparable track record of safety, security, convenience and investor satisfaction. As an investment product, they carry some risk, but the risks are clearly and simply disclosed, of short duration and managed through high-quality investments. If the regulatory goal is to eliminate all risk from the product, then the bar is set impossibly high.”
Rather, Chandoha said the focus should be on ensuring that money market funds “retain sufficient liquidity to handle surges in redemption requests and maintain rigorous scrutiny over the quality of their investment portfolio. As we discuss, we believe that reforms put in place by US regulators in 2010 have accomplished that – and the volatile markets of the summer of 2011 served as a test for those new requirements, a test that US money market funds passed with flying colors.”
Schwab currently manages some $150 billion in money market assets of April 30, 2012.