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Commissioner Walter on Money Fund Reform

In a speech on March 19, SEC Commissioner Elisse Walter encouraged the industry to engage with the Commission about additional money market fund reforms.   She stated, "I have always appreciated the views and involvement of the industry, and believe that your engagement is essential to reaching optimal answers to the important questions posed in securities regulation."

In her remarks, Commissioner Walter looked back on the evolution of money market funds, noting that the industry grew from 300 funds with approximately $180 billion in assets in 1982 to 640 funds with $3 trillion in assets today.  In addition, she discussed the increasingly important role of money market funds in capital markets, as money funds have become the largest holders of commercial paper.

Commissioner Walter also addressed the money market fund industry's historic stability, though she noted that more than 100 funds received support from their managers (or management affiliates) during the period August 2007 through December 2008.  She added that the federal government also stepped in to stabilize the industry and no longer has the ability to stop a future run.  She recognized the Commission's 2010 amendments to 2a-7, but emphasized that those amendments were always meant to be a first step in addressing issues in the industry. 

While she acknowledged the difficulty of adopting significant reform during a period of low yields in the industry, Commissioner Walter stated that there is "significant risk in not acting."  She then outlined some possible reform options, including: establishing an NAV buffer, implementing a floating NAV, imposing a liquidity or redemption fee; a two-tier system that would provide retail investors with a choice between floating and stable value funds while requiring floating rates for institutional investors; imposing mandatory redemptions in kind; implementing private liquidity facilities; structuring funds as special purpose banks; enhancing restraints on unregulated money market fund substitutes; and improving investor transparency.

The text of the speech is on the SEC's website, at