Money market fund regulations need to be revamped quickly to fixthe funds' inherent vulnerability to runs, said U.S. Securities andExchange Commission Chairman Mary Schapiro.

“I do feel a sense of urgency about the structural weaknessesthat exist in money market funds,” Schapiro said today at aWashington breakfast with reporters sponsored by the ChristianScience Monitor. The SEC has been working on two possibilities tochange aspects of the $2.6 trillion money funds industry that makethem “prone to runs,” she said, with the agency considering eithera departure from the traditional $1 share price or mandatingcapital cushions.

Regulators have debated how to make the funds more stable sincethe 2008 collapse of the $62.5 billion Reserve Primary Fund, whichtriggered an industry-wide run by clients that helped freeze globalcredit markets. The agency enacted changes two years later in anattempt to prevent runs, including new liquidity requirements,shorter maturity limits and enhanced disclosure mandates.

Schapiro said in a November speech that the agency would soonpropose revamping fund rules. The commission hasn't yet voted on aproposal. Republican Commissioner Daniel M. Gallagher has statedthat the agency should hold off on such an overhaul.

When asked today whether more than 16,000 comment letters willforce regulators to re-propose the so-called Volcker rule's banagainst banks' proprietary trading, Schapiro said it depends on“how much the rule changes.” The statute is set to go into effectin July, and Schapiro said she doesn't know whether the rulemakingwill be complete by then.

The agency has also been working on structural changes to theequity markets in the wake of the May 6, 2010, crash that erased$862 billion from equities in less than 20 minutes beforerebounding. Schapiro said the overhaul, which saw the addition ofexchange circuit breakers, is now awaiting a better understandingof market activity.

“We don't have enough data yet to really be able to justifysignificant additional steps at this point,” Schapiro said. The newsystem instituted by the SEC to track the trading of the mostactive market participants should collect information that will “becritical to our ability to justify further changes,” she said.

Schapiro also said today that she expected 85 percent of failedbrokerage MF Global Inc.'s former securities customers will be“paid in full.” The liquidation of the bankrupt New York-based firmshould return most of those funds from about 320 securitiesaccounts, she said, which represented a fraction of the brokerage'scommodities-focused business.

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