Even as Chairman Mary Schapiro heads for the door next week
, a new SEC
report may give her allies more fuel for the fight over money market mutual fund reform.
On November 30, the SEC's division of risk, strategy, and financial innovation released a new report
on money funds, specifically addressing three things: the 2008 financial crisis and emergency government support for money funds; the 2010 money fund reforms and their efficacy; and the potential impact of future money fund reforms on investors' use of money funds versus money fund competitors. [Read a PDF of the report
Ronald Orol of MarketWatch wrote
about the new report.
Among other things, the report's authors at the SEC concluded that, if the 2010 reforms had been in place prior to September 2008, they would not have been enough to save the Reserve Primary Fund
. The reforms required at least 10 percent of each money funds' assets to be in securities that can be liquidated in a day and 30 percent in those that can liquidated in a week.
"No fund would have been able to withstand the losses that the Reserve Primary Fund incurred in 2008 without breaking the buck [i.e. falling below $1 in NAV], and nothing in the 2010 reforms would have prevented the Reserve Primary Fund's holding Lehman Brothers debt," the report reads.
Yet the authors of the study also conclude "funds are more resilient now to both portfolio losses and investor redemptions than they were in 2008."
The report is a response to a September request
sent to Schapiro by Republican SEC commissioners Daniel Gallagher
and Troy Paredes
as well as Democratic SEC commissioner Luis Aguilar
. All three opposed Schapiro's failed attempt
this year to further regulate money funds.
Neil Anderson, Managing Editor
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