Last year, Karrie McMillan led off the first day of the Investment Company Institute’s annual mutual funds conference with a stinging takedown of the Securities and Exchange Commission’s treatment of the industry.

"What the SEC is considering doing to money market fund investors is outrageous,'' McMillan she said. "Outrageous.''

"Outrageous" in McMillan's view were a proposal by the SEC that might force the net asset value of a money market mutual fund to float from a stable $1 a share; and, proposals that would require capital buffers, as well as slow the ability of investors to pull their money out of funds.

Then-commissioner Elisse Walter – now chairman of the SEC – was the next speaker. She shot right back.

"Late last year, the industry brought its dialogue with the commission to an abrupt end,'' she told attendees.

She said the mutual fund industry should "move away from media statements” and "re-start a process of constructive engagement instead of one of unconstructive disengagement,'' she said.

It’s a year later now. This year’s ICI Mutual Funds and Investment Management Conference opens today in Palm Desert, Calif.

And the second post-2008 round of reforms for the money fund industry is still up in the air.

In November, the Financial Stability Oversight Council took up the SEC’s cudgel and made three recommendations for a new round of reforms. These included allowing the net asset value of shares in a fund float, to reflect the value of holdings at any time; requiring a capital buffer equal to 1% of assets and a "minimum balance at risk" in funds; or a 3% capital buffer and more stringent diversification of assets.

In February, Goldman Sachs, Fidelity Investments and a host of other mutual fund firms tried to head off any move toward a floating net asset value by instead starting to publish the market value of assets held in a fund, each day. The daily report shows that the value of the assets can float, even if the share price is fixed at $1.

Fidelity, JPMorgan Chase & Co. and BlackRock also are urging that any new restrictions not include money-market mutual funds that invest solely in government-backed or municipal securities. The presidents of the 12 Federal Reserve regional banks also have said the changes should initially focus on the prime funds used by institutional investors, not retail investors, because the big guys are the ones who move fastest when things go bad.

“We are beginning to see an emerging consensus developing around the realization that Treasury, government and muni funds do not need any further reform,” Nancy Prior, president of Fidelity’s money-market business at Boston-based Fidelity, said last week at a conference in Florida.

The SEC may show where it now stands, before the month is out. But in the meantime, you are likely to get the first glimpse of whether the past year has been spent in constructive re-engagement between the industry and its regulator this morning.

The first address at the ICI conference again will be delivered by McMillan. And the second address again comes from the SEC. This time: Norm Champ, director of the division of investment management.


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