SEC to Give Money Managers Freer Hand

In light of the crisis of confidence in rating agencies following the subprime crisis, the Securities and Exchange Commission will diminish the importance of money market fund managers’ reliance on such agencies when investing in short-term debt.

This will have wide repercussions in the $3.4 trillion money market industry, The Wall Street Journal reports this morning, likely resulting in a wider variety of investments by money market funds.

Of the dozen or so changes the SEC is expected to propose tomorrow, the one affecting the money market fund industry is the most significant, people familiar with the matter tell The Journal. But critics counter that rather than lessen reliance on ratings agencies, the SEC should go back to the drawing board to improve their assessments of companies, as many investors continue to rely on the big three: Moody’s, Standard & Poor’s and Fitch.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.