“Today, the SEC has adopted important structural reforms of
money market mutual funds (MMFs). In particular, a floating NAV for
institutional prime funds – along with enhanced transparency and
diversification, and strengthened government MMFs – reduces risks to financial
stability posed by MMFs.”
“The structural vulnerabilities of MMFs made them
susceptible to destabilizing runs in the financial crisis, and resulted in
extraordinary government support. Following initial reforms adopted by
the SEC in early 2010, the Financial Stability Oversight Council (FSOC)
consistently highlight unaddressed risks in MMFs. In 2012, when the SEC
announced that it would not proceed with a vote on further MMF reforms, the
Council used its authority under Section 120 of the Dodd-Frank Act to propose
potential recommendations for reform.”
“It is important that the FSOC process has been used in an
effective way. The FSOC came together, identified an unaddressed risk to
financial stability, and encouraged the relevant regulator to take action.
While the SEC’s reforms will require careful consideration and continued
monitoring of their effectiveness in addressing risks to financial stability,
the SEC’s final rule is a significant step forward. “
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