Mary Schapiro, SEC Chairman, Proposes Tougher Rules On Money Market Funds

* Says money market funds still at risk for runs

* Schapiro says 2010 reforms not enough

* Faces resistance from industry, fellow commissioners

By Sarah N. Lynch

WASHINGTON, March 15 (Reuters) - The top U.S. securities regulator is determined to implement a new round of money market fund reforms, despite facing strong resistance from many of the biggest industry players who say more regulations are unnecessary.

Securities and Exchange Commission Chairman Mary Schapiro says further steps are needed to help prevent another run by panicked investors, like the one seen in 2008 when the Reserve Primary Fund "broke the buck" with its net asset value falling below $1.

"As a regulator who saw the damaging effects of the 2008 run on money market funds, I find it hard to remain on the sidelines despite calls to declare victory on this issue," Schapiro said in a speech on Thursday to the Society of American Business Editors and Writers.

Currently, staff at the agency are drafting two potential courses of action.

One plan would impose a capital buffer and a hold-back on redemption requests. The other would implement a floating fund valuation to help curb investor complacency over the stable $1-per-share value that funds currently quote.

So far, though, Schapiro's proposals have met with major resistance, both from many in the $2.6 trillion industry and even some fellow commissioners.

The SEC's two Republican commissioners and Luis Aguilar, a Democrat, have all expressed doubts about the need for more regulations.

They point to a series of new rules adopted in 2010 that tightened credit quality standards, shortened the maturities of fund investments and imposed a new liquidity requirement, among other things.

Those rules, many say, have served money market funds well, and helped them weather the European debt crisis last summer and a downgrade of the U.S. government's credit rating.

Schapiro said those prior reforms were important, but still fall short of what is needed.

"While many say our 2010 reforms did the trick - and no more reform is needed - I disagree. The fact is that those reforms have not addressed the structural flaws in the product. Investors still have incentives to run from money market funds at the first sign of a problem," she said.

Schapiro will need at least three votes in order to propose the new rules, and it is still unclear if she will be able to win over one or more of her three skeptical colleagues.

The proposals are expected to be ready for commissioners to review sometime in the coming months.

Comments

[John Goucho]

08:43 AM on 03/18/2012

Mary Shapiro has been part of the problem for upwards of the last 15 years. It was under her watch that the abuses have taken place. In any other industry, she would have been fired in order to bring in reformers.

[galex101]

07:35 PM on 03/17/2012

If the SEC doesn't enforce the rules they have, how will adding more rules help?

The SEC spent more time and money on Martha Stewart than Bernie Made-off. Thier priorities seem to be skewed.

[frank day]

02:11 PM on 03/17/2012

We need more women as regulators,

unlike the men they aren't afraid to be truth tellers.

Google "Brooksley Born" and "Catherine Austin Fitts".

[mashtoe]

01:48 PM on 03/17/2012

Democrats repealed Glass Steagal back in 1999 under Clinton. And Obama made sure Glass Steagal wasn't brought back for the simple reason that it actually worked! Can't have simple rules that work.

[frank day]

02:12 PM on 03/17/2012

Much truth to that.

But it was Bush that let things really go to heck.

Hank Paulson was a total to ol.

[rosiebag]

01:46 PM on 03/17/2012

This woman is unfit to serve.

[frank day]

02:12 PM on 03/17/2012

Why?

[Stoopid American]

03:52 AM on 03/17/2012

The SEC is a toothless, pathetic waste of taxpayer funds. Get off your behinds and ENFORCE THE LAW. Why does a judge have to throw out your puny settlements just to get your attention?

[mashtoe]

01:49 PM on 03/17/2012

Because Democrats won't allow it. Same goes for talk of jobs! Democrats support free trade with communist China, H-1b work visas, and illegal labor...yet they claim to be for American workers?! Its insane.

[frank day]

02:14 PM on 03/17/2012

Uhhhmmmm.... It is the House Republicans who do their very best to gut the SEC every chance they get.
Still, definitely a bi-partisan clusterfuk.

[Sooperbohl]

08:13 PM on 03/16/2012

Come on fellow commisioners... what are you afraid of? Are your friends on Wall St going to stop lining your pockets? Do the right thing.. Do what you were sworn to do.. Your there to protect the American people from fat cat thieves!! If you dont want to do your jobs, get out of the way.. your friends are waiting for you!

[the truth leans left]

02:11 PM on 03/16/2012

stop commodities speculation.

[jcaunter]

01:37 PM on 03/16/2012

Yeah, hard to remain on the sidelines. She's just got to jump in there and help Wall Street commit their frauds whenever possible:

http://www.zerohedge.com/news/goodbye-mary-schapiro-grassley-asks-sec-account-illegal-document-destruction

[Sundialsvc4]

12:26 PM on 03/16/2012

Come now, Mary... why do you say that? You've been a great "Fixer" since the first day you took office. Under your watch, a revolving door of financial crimes have been disposed-of forever in chump change "settlements" that served as a keep-out-of-jail free card for the executives in question.

Obviously, it might be of concern to you that your tenure might be ending; that you might have over-stayed your welcome. But by now you are yourself a billionaire many times over (if you had the slightest bit of criminal wits about you...) and you'll never even have to acknowledge being in possession of all that cash. Just mumble a few choice words, resign your office graciously, and move on to the Good Life that you made for yourself at the expense of hundreds of millions of people. Don't shoot off your mouth and you won't wind up at the bottom of the Potomac wearing concrete overshoes. Just choose thirty highly-polished pieces of silver, pay to have them framed professionally, and hang them on your new office wall just above the new sign on your desk: "Mary Schapiro .. Iscariot."

[Lindytindy]

11:32 AM on 03/16/2012

SEC should be in prison for aiding and abetting bankster fraud. Oh wait, the banksters aren't in prison. They are prospering and running the country instead. This is the USA today, run by criminals for criminals, the victims are in prison and the working class is being systematically destroyed, next there will be genocide against the chronically poor, elderly and unemployed. After the next financial meltdown, when there is nothing left and we are Mexico North, the 1% will abscond to Dubai, their idea of heaven, nothing to do but shop, party and endless slaves to see to their every need.

[the truth leans left]

02:10 PM on 03/16/2012

and we the people will rise up again

[Lindytindy]

11:29 AM on 03/16/2012

SEC should enforce existing rules for a change, there's a concept, Do Your Job. They should all be in prison for collusion with bankster fraud anyway. Like that will happen. The real criminals are running the show. The victims are in prison. That's the kind of society we have today. Oh well the next financial collapse should speed our decline into Mexico North. Maybe the crooks will abscond to some other country. Oh I just had a sudden insight into why we are in Iraq and Afghanistan. After they destroy this country the 1% will move there and create some kind of Dubai like sterile, fascist society where there is nothing to do but shop and party. And endless amounts of slaves.

[dukeitout]

11:11 AM on 03/16/2012

We don't need new rules. We need enforcement of existing rules.

[rosiebag]

01:46 PM on 03/17/2012

We need a taskforce

[castlemike]

10:27 AM on 03/16/2012

Election year PR piece IMO. Once again the SEC is going through the motions "DRAFTING" two potential courses of action, because they fear a run by investors losing confidence in the system. IMO this is mostly due to perceived lack of enforcement of obvious blatant Fraud as a business model.

Things like ignoring Corzine at MF Global stealing cash from 40,000+ customer segregated accounts or the $25 billion mortgage settlement.

[notdarkyet]

10:29 AM on 03/16/2012

Exactly. Talk and no action.

[Trustfunded1]

10:18 AM on 03/16/2012

IOW's she's doing nothing again.

Move along peasants.