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Alternative Market Briefing

SEC says reforms in money market funds will fundamentally change industry

Thursday, August 21, 2014

Komfie Manalo, Opalesque Asia:

Securities and Exchange Commission chairman Mary Jo White said that the reforms the SEC would introduce in money market funds would fundamentally change the way the industry will operate.

In a speech delivered during an open meeting to discuss the reforms, White said the changes would reduce the risk of runs in money market funds and provide important new tools that will help further protect investors and the financial system in a crisis. She added that this strong reform package will make the financial system more resilient and enhance the transparency and fairness of these products for America’s investors.

"Over the last several decades, money market funds have become a critical part of the American economy, providing an important source of short-term financing for issuers, including American businesses, state and local governments, and other market participants," she said and added, "Today, nearly $3tln is invested in money market funds, much of it in institutional prime funds held by investors such as pension funds and corporations. Issuers and investors now rely daily on money market funds, and the benefits of such funds are significant."

But the widespread use of money market funds can also create risks through investor runs and the contagion that can follow. During the last financial crisis, institutional prime money ma......................

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