Two U.S. Securities and Exchange Commission members faulted chairman Mary Schapiro’s handling of discussions over rules governing money-market funds, saying she misrepresented other commissioners’ dissents after proposing regulations that could “severely compromise” the industry.
“The changes the Chairman advocated were not supported by the requisite data and analysis, were unlikely to be effective in achieving their primary purpose, and would impose significant costs on issuers and investors while potentially introducing new risks into the nation’s financial system,” Republican commissioners Daniel Gallagher and Troy Paredes said yesterday in a statement.
The statement is the latest in a string of public barbs among the SEC’s presidentially appointed commissioners following Schapiro’s decision last week to scrap a vote on a proposal for tighter money-market fund rules. In canceling the vote, Schapiro said “the issue is too important to investors, to our economy and to taxpayers to put our head in the sand and wish it away.”
Gallagher and Paredes, who had offered a counterproposal that would allow firms running money funds to stop investor flight in the event of a run, said they were “dismayed” by Schapiro’s statement. They also commended Luis Aguilar, a Democratic commissioner, who called for further study before proposing rules that could cause investors to move money from money-market funds to other unregulated investment vehicles.
“The Chairman’s statement creates the misimpression that three Commissioners -- a majority of the Commission -- are not concerned with, or are somehow dismissive of, the goal of strengthening money-market funds,” Gallagher and Paredes said. “This is wholly inaccurate.”
For coverage of the SEC’s decision, see SEC Money-Fund Vote Cancelled and Former SEC Chair Criticizes Agency’s Money-Fund Punt. For more on the aftermath of that decision, see Money Funds to Test Geithner, Bernanke and Despite Reprieve, Money Funds Under Pressure.