Financial Executives International Reacts To The SEC's Adoption Of Money Market Fund Rules

MORRISTOWN, N.J. and WASHINGTON, July 23, 2014 /PRNewswire/ -- Financial Executives International (FEI), the association of choice for CFOs and other senior-level finance executives, issued today the following statement in response to the SEC's adoption of money market fund rules:

Earlier today, the U.S. Securities and Exchange Commission ('the Commission') voted to approve a new rule governing money market funds, following years of heated debate between regulators and industry groups dating back to the financial crisis.

The Commission's new rule will force "prime" money market funds used by large institutions to float their share price. Many critics, including FEI, have objected to this part of the rule, which is a major change from the current structure in which all money market funds maintain a stable $1 per share net asset value (NAV), and will cut off a major supply of short-term funding for corporations who rely on the funds.

Another piece of the rule will permit fund boards to impose   redemption "gates" or fees of up to 2 percent in stressful market conditions if a fund's weekly liquid assets fall below 30 percent of its total assets. These "gates" could only remain in place for 10 business days.

Both reforms are slated to go into effect two years after they are published in the Federal Register.

The Commission approved the measure in a 3 to 2 vote.  Republican SEC Commissioner Michael Piwowar and Democrat Commissioner Kara Stein both voted against the measure, while Chair White and Commissioners Gallagher and Aguilar voted in favor. Commissioner Piwowar remains concerned with issues surrounding the floating net asset value, while Commissioner Stein  was concerned that  the fees and gates may actually fuel firesales and runs.

The Commission also said that the U.S. Treasury Department and the Internal Revenue Service will unveil a plan permitting investors to use a simplified tax accounting method. Tax implications were a major sticking point for critics of the floating NAV.

"As an association that represents corporate financial executives from various industry sectors, it is vital to the interests of our membership that money market funds remain intact," said Marie Hollein, President and CEO of Financial Executives International.  "Although we appreciate the Commission providing companies with two years to adapt to these changes,  we remain very concerned about the challenges corporations may face under this new rule."

FEI appreciates the U.S. Securities and Exchange Commission's continued commitment to designing a financial regulatory system that is competitive and transparent. FEI looks forward to working with the Commission on these issues.

About FEI
Financial Executives International is the leading advocate for the views of corporate financial management. Its almost 11,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, research and publications. Members participate in the activities of 74 chapters in the U.S. and a chapter in Japan. FEI is headquartered in Morristown, NJ, with a Government Affairs office in Washington, D.C. Visit www.financialexecutives.org  for more information.

SOURCE Financial Executives International