NEW YORK (TheStreet) -- Fidelity Investments and Federated Investors (FII) have been leading the charge as the investment industry lobbies fiercely against reforms to money market funds.
Runs on money market funds were among "several key events during the financial crisis [that] underscored the vulnerability of the financial system to systemic risk," according to an Oct. 2010 report by the President's Working Group on Financial Markets, comprised of the U.S. Secretary of the Treasury, and the Chairmen of the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
|The threat of money market reforms has prompted four letters and nine visits to the SEC from Fidelity over the past 15 months.|
While the SEC made some reforms in early 2010, the PWG report concluded "more should be done to address systemic risk and the structural vulnerabilities of [money market funds] to runs."
The SEC is expected to come out with a new rule proposal in the next few weeks.The stakes for the $3 trillion money market fund industry could hardly be higher, since its success rests largely on investors' assumption that the funds are as safe as bank accounts. Reforms that would undermine that assumption "would be detrimental to Federated's money market fund business and could materially and adversely affect Federated's operations," Federated Investors argued in its 2011 10-K. Federated gets more than 40% of its revenues from its money market business. William Birdthistle, professor at Chicago-Kent College of Law, believes money market sponsors such as Federated are right to worry that regulatory changes designed to demonstrate to investors that money market funds are not risk free could spell the end of the business. "I don't think the industry will collapse overnight, but it wouldn't be difficult for banks to say, 'if you want a safe investment there is one and only one safe investment, and that's a bank account,'" he says. It is not surprising, then, that the mutual fund industry continues to argue no new changes are needed. No companies appear to be working harder at making that point than Fidelity and Federated. Fidelity is the largest money market fund manager in the U.S., according to Thomson Reuters. Since November 2010, representatives from Fidelity have met with SEC officials nine times and sent four comment letters related to a 2010 President's Working Group report on money market reforms, according to information on the SEC's website. Federated representatives have sent 12 letters and held one meeting over that time.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV