U.S. Chamber Disappointed SEC’s Money Market Mutual Fund Rule Harms Main Street Financing

Wednesday, July 23, 2014 - 12:00pm

‘A floating NAV does not address run risk and would severely if not irreparably harm the viability of the product,’ Says Hirschmann

WASHINGTON, D.C.—The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC) President and CEO David Hirschmann issued the following statement today regarding the Securities & Exchange Commission’s (SEC) vote to approve a new rule to reform money market mutual funds (MMMFs) by implementing a floating net asset value (NAV) and liquidity fees and gates:

“Throughout this debate, we have called on the Commission to ensure that any additional reforms to MMMFs achieve our shared goals of strengthening the product and preserving its utility for the businesses, cities and states that rely on money funds as a vital source of short-term cash management. Not only did mayors, state treasurers, and a broad and bi-partisan group of Members of Congress join us in this view, both the SEC and the Financial Stability Oversight Council also highlighted the importance of money funds to Main Street financing.  

“A floating NAV does not address run risk and would severely if not irreparably harm the viability of the product, taking away a key cash management product and a primary source of funding for the commercial paper market. Companies that invest in money funds or that rely on money funds to buy their short-term debt will be forced to find alternate, higher cost sources of short-term financing and investment. 

“While we appreciate some of the changes made to address the impact of the SEC’s MMMF rules on individual investors, the Chamber and thousands of others warned about the impact of a floating NAV. The mere possibility of this outcome caused many companies to move their investments to other less efficient products. With this final rule, it is highly likely that the trend will continue as treasurers face significant operational challenges, higher costs and less flexibility.

“We will consider all appropriate options as we carefully review the final rule, examining the operational, accounting and tax consequences. In particular, we will review any further guidance issued by the IRS to provide investors clarity on questions surrounding tax reporting. If it turns out that the IRS does not or cannot effectively address the issue, it will both undermine the goal of the SEC’s rule and have material implications of the cost-benefit analysis the SEC conducted.”

Since its inception in 2007, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.