Corporate treasury executives say they will decrease theircompany's investments in money-market funds if the Securities andExchange Commission implements proposed changes to the regulationof such funds. But they plan to invest more in money funds if theFederal Deposit Insurance Corp.'s unlimited coverage for businessdemand deposit accounts ends, as it is scheduled to do on Dec. 31,according to a survey of 242 treasury professionals conducted byStrategic Treasurer, an Atlanta-based consulting company, andCapital Advisors Group, an investment advisor in Red Bank, N.J.

“There is certainly terrific uncertainty with the FDIC and themoney-market funds regulations, but it appears the treasurycommunity is ready and able to swap investment channels in eitherone of those instances,” says Ben Campbell, president and CEO ofCapital Advisors.

Companies' investment accounts haven't changed much since 2009,when treasurers responded to the financial crisis, says Campbell,pictured at right. “Now with regulatory changes potentiallyhappening in the money fund world as well as on the FDIC side, wesee a shift similar to the size of the shifts that we saw in'08.”

Opponents of the SEC's proposed changes have warned that newregulations could scare corporate treasurers away from money funds.The survey, which distinguishes among the different ways companiesinvest in money funds, suggests some companies have already backedaway from the funds. Just 39% of the executives surveyed say theircompanies invest in money funds directly, down from 44% in lastyear's survey. Only 14% invest in money funds via independentportals, down from 21% last year, and just 36% invest in the fundsvia bank portals, down from 49% last year.

If the SEC requires money funds to switch to a floating netasset value (NAV), 43% of companies that invest in the fundsdirectly say they would decrease their investments, as do 35% ofthose who invest via an independent portal and 41% of the companiesthat invest using a bank portal. If the SEC put in place a 30-dayredemption hold of 5% of assets, 52% of companies that investdirectly say they would decrease their investments, as do 48% ofthose that use an independent portal and 52% of those using a bankportal.

On the other hand, companies might look morefavorably on money funds if the unlimited FDIC coverage on bankaccounts disappears. Nineteen percent of companies that investdirectly in money funds, 8% of those that invest via independentportals and 14% of those using bank portals say they would increasetheir assets in money funds in that case.

If both changes occur—the SEC re-regulates money funds andunlimited FDIC coverage ends—Campbell says companies would probablyturn to such short-term investments as government securities,direct purchases of corporate securities and repurchaseagreements.

Campbell notes that some of his company's clients have preparedfor the possibility of new money fund regulations combined withlimited FDIC coverage by setting up the infrastructure to makeinvestments via a separate account. The companies are stillinvesting in money funds, he says, and haven't yet funded theseparate account. But if there were significant changes in moneyfund regulations, “they would simply swap between the two options,”he says.

Campbell also sees a trend toward treasuries relying less oncredit rating agencies and more on independent due diligence orother sources of information. Just 33% of the executives say theyrely on credit ratings, down from 36% in last year's survey, while8% say they pay for third-party research, up from 4% last year.

Craig Jeffery, managing partner at Strategic Treasurer, notesthat the survey also shows companies' continued focus ondiversifying debt, including more growth in debt laddering. Andwhile there seem to be fewer covenants on companies' debt, “thecovenants that exist are a little bit tighter, more restrictive,”Jeffery says. “We think that's pretty significant.”

And despite the widespread complaints about thin staffing oftreasury departments, Jeffery notes that the survey suggests morehands on deck: while 12% of executives say their staffing decreasedover the last two years, 19% say it increased.