The U.S. Securities and Exchange Commission was presented with a 337-page staff proposal to require the $2.5 trillion money-market fund industry to float share prices or hold more capital and curb redemptions, according to a person familiar with the proposal.
The proposal may put the SEC on course for a clash among commissioners and with the industry. The plan won’t advance if the three commissioners who have already raised concerns about its impact on money funds hold firm. If SEC Chairman Mary Schapiro wins enough support to release the proposal for public comment, the agency will face renewed opposition from the U.S. Chamber of Commerce and Federated Investors Inc. Chief Executive Christopher Donahue, who has threatened to sue if a rule is ultimately adopted.
Donahue, head of Pittsburgh-based Federated Investors Inc., the third-biggest U.S. money-fund provider, said Jan. 27 that his firm would sue the SEC if it went forward with a proposed rule. Donahue and John McGonigle, Federated’s chief legal officer, met with Aguilar on June 22 to discuss the money fund proposal, according to an agency memo.