The asset management group of the Securities Industry and Financial Markets Association said it opposes a floating net asset value for money market funds but otherwise supports the Securities and Exchange Commission’s proposed enhancements to the funds, echoing the sentiments of the Investment Company Institute.
SIFMA said the SEC’s proposes would help the funds resist economic stresses, reduce the risks of significant redemptions and facilitate the orderly liquidation of a money fund that breaks the buck. Specifically, it supports proposals to limit the funds’ risk exposure, increase reporting requirements and raise cash minimums.
“SIFMA’s asset management group is focused on improving the operations, efficiency and trust in capital markets, enhancing regulatory effectiveness and addressing the ‘nuts and bolts’ of the buy side’s operations,” said Joseph W. Sack, managing director of the asset management group.
However, SIFMA said it was strongly opposed to a floating NAV “since investors want to invest in stable NAV money market mutual funds. SIFMA expects that if the NAV floats, many shareholders would redeem out of money funds in favor of other products, some of which may be less carefully regulated, and therefore pose more systemic risk.”
SIFMA is also very much against different cash minimums for retail and institutional funds. The organization also said that should a money fund liquidate, offering investors the choice between liquidity and principal preservation “would prevent the investment advisor from considering the best interests of all shareholders based on the securities held” due to the conflicting goals.
As the SEC has considered eliminating credit ratings requirement, SIFMA argued that it provides “important shareholder protection.” Finally, SIFMA said it would be very difficult for a fund manager to try and determine the redemption risk of every retail and institutional investor, in light of the fact the SEC is considering imposing different sets of rules for these investors.