Two U.S. Securities and Exchange Commission members faultedchairman Mary Schapiro's handling of discussions over rulesgoverning money-market funds, saying she misrepresented othercommissioners' dissents after proposing regulations that could“severely compromise” the industry.

“The changes the Chairman advocated were not supported by therequisite data and analysis, were unlikely to be effective inachieving their primary purpose, and would impose significant costson issuers and investors while potentially introducing new risksinto the nation's financial system,” Republican commissionersDaniel Gallagher and Troy Paredes said yesterday in a statement.

The statement is the latest in a string of public barbs amongthe SEC's presidentially appointed commissioners followingSchapiro's decision last week to scrap a vote on a proposal fortighter money-market fund rules. In canceling the vote, Schapirosaid “the issue is too important to investors, to our economy andto taxpayers to put our head in the sand and wish it away.”

Gallagher and Paredes, who had offered a counterproposal thatwould allow firms running money funds to stop investor flight inthe event of a run, said they were “dismayed” by Schapiro'sstatement. They also commended Luis Aguilar, a Democraticcommissioner, who called for further study before proposing rulesthat could cause investors to move money from money-market funds toother unregulated investment vehicles.

“The Chairman's statement creates the misimpression that threeCommissioners — a majority of the Commission — are not concernedwith, or are somehow dismissive of, the goal of strengtheningmoney-market funds,” Gallagher and Paredes said. “This is whollyinaccurate.”

For coverage of the SEC's decision, see SEC Money-Fund Vote Cancelled and Former SEC Chair Criticizes Agency's Money-Fund Punt. Formore on the aftermath of that decision, see Money Funds to Test Geithner, Bernanke and Despite Reprieve, Money Funds Under Pressure.

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