NEC Praises SEC Money Market Reform Decision

BOSTON – The New England Council, non-partisan alliance of businesses, academic and health institutions, and public and private organizations, today offered its praise of the Securities & Exchange Commission’s decision not to move forward on controversial proposals to reform the widely used investment vehicle,  money market funds.

“For nearly three decades, money market funds have served as a cost-effective means for a wide array of investors—including a number of cash-strapped municipalities and government agencies throughout New England–to achieve market rates of return, while promoting stability of principal and liquidity of their investment,” said James T. Brett, President & CEO of The New England Council.  “The Council was very concerned about the impact of the proposed change in how these funds are valued would have on many investors, and we have worked over the past year to advocate in support of maintaining the current system.  We were very pleased to learn of the SEC’s decision and the response to our concerns, and those of many state and corporate treasurers.”

In October 2010, the President’s Working Group on Financial Markets proposed that money market funds shift from a the standard $1 per share valuation, to a floating Net Asset Value (NAV).  This proposal was designed  to help shareholders better understand the risk of investing     Many members of The New England Council grew concerned that, while well-intentioned, the floating NAV proposal would have serious consequences for an important mechanism that is helping facilitate our nation’s fragile recovery.  Over the past year, the Council has advocated to maintain the standard $1 per share valuation:

In a January 2012 letter to SEC Chairman Mary L. Shapiro, the Council outlined its concerns.   In particular, the Council expressed concerns that states and municipalities around our region could face a contraction of available financing, just at a time when they are struggling with some of the tightest budget restrictions in memory.  The letter noted that the consequences of a move to a floating NAV are multifold, including administrative costs for money market funds, administrative burden for shareholders, and a reduction in available funds for such expenses as corporate operating needs, infrastructure projects, and other municipal cash needs.

More recently, in June 2012, the Senate Banking, Housing and Urban Affairs Committee held a hearing entitled Perspectives on Money Market Mutual Fund Reforms. During her testimony, SEC Chair Mary Schapiro emphasized her interest in introducing the Floating NAV as a reform alternative for money market funds.  The New England Council worked with Senator Jack Reed’s office to submit a letter outlining the NEC’s concerns as part of the record of this hearing.

The New England Council, the country’s oldest regional business organization, is an alliance of businesses, academic and health institutions, and public and private organizations throughout New England formed to promote economic growth and a high quality of life in the region.  The Council is dedicated to identifying and supporting federal public policies and articulating the voice of its membership regionally and nationally on important issues facing New England.  The NEC is also committed to working with public and private sector leaders across the region and in Washington through educational programs and forums for information exchange.  For more information, please visit: www.newenglandcouncil.com.

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