The Securities and Exchange Commission plans to issue a proposed rule on money market funds "in very short order," said SEC Chairman Mary Schapiro on Monday, which would reduce the funds' susceptibility to runs.
Schapiro said this latest round of money market fund reforms by the agency would include two regulations: instituting a capital buffer and floating NAVs.
Speaking at the Securities Industry Financial Markets Association (SIFMA) annual meeting in New York, Schapiro said she wants to make "substantial progress" on the SEC's initiative to reform money market funds that the regulator has undertaken with the Financial Stability Oversight Council (FSOC).
Recommended For You
The financial crisis of 2008, Schapiro said, "revealed shortcomings in the functioning of the short-term credit markets–and money market funds represented a weakness." Structural flaws in money market funds "were exposed," she said. "The crisis began with the failure of a large investment bank, followed by a run on a single money market fund that spread. Within days, the short-term credit market was frozen."
Schapiro went on to say that just as the SEC "has taken substantial steps to address market structure inadequacies in the equity markets that were revealed on May 6 of last year, we have an obligation to evaluate and address weaknesses in the short-term credit market, and the $2.6 trillion money market fund industry, in particular."
After the financial meltdown in 2008, the SEC in February 2010 enacted significant reforms to its money market fund regulations by tightening credit quality standards, shortening weighted average maturities, and for the first time, imposing a liquidity requirement on money market funds.
The SEC also adopted reporting requirements that provide public transparency so investors can see their money market funds' exposure and also provided investors access to money market funds' mark-to-market valuations, known as the "shadow NAV." This information is reported on a monthly basis, with a 60-day lag to the public.
But while the money market fund reforms "were a critical first step," Schapiro said that "additional steps" are needed.
The options under the proposed rules, she said, would include a "capital buffer option to serve as a cushion for money market funds in times of emergency and floating NAVs, which would eliminate the expectation of stability that accompanies the $1 stable NAV."
Both of these reform options, she said, "would ensure that investors who use money market funds realize the costs that might be imposed during rare market events."
Following her speech, Schapiro was interviewed by Charlie Rose of PBS from the stage where she spoke at the Marriott Marquis in Times Square. Rose asked Schapiro why she wanted to focus on money market funds at SIFMA's annual meeting.
"It's pretty unanimous among federal and European regulators that we need to further bolster the resiliency of this financing mechanism," Schapiro responded.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Melanie Waddell
Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2024. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.
