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Fidelity, Federated Lead Charge Against Money Fund Reform

"Fidelity is an industry leader and we believe that it is important to take a leadership position and engage with policymakers on important matters, such as the prospect of further money market mutual fund changes, which may significantly affect investors, the economy, our company and our industry," wrote a spokesman via e-mail. A Federated spokesman declined to comment on the company's lobbying activities.

While the issue is clearly of great importance to the entire mutual fund industry, other companies do not appear to have been nearly as active as Federated and Fidelity in their lobbying efforts. Next most active after those two companies are BlackRock Inc. (BLK - Get Report) and the Investment Company Institute (ICI), the chief lobbying organization for the mutual fund industry. BlackRock officials have sent three letters and held one meeting with the SEC, while the ICI has sent two letters and held two meetings.

At issue is special accounting treatment granted to the money market fund industry in 1982, contributing to an illusion that money market funds "were as safe as bank accounts," as former Treasury Secretary Hank Paulson put it in his 2010 book "On the Brink: Inside the Race to Stop the Collapse of the Global Financial System"

The accounting rule allows money market funds to report to investors that their investment in the fund hasn't declined in value as long as it hasn't changed by more than .5%. When the funds decline by more than that amount, they may have to seek outside support or report the decline, known as "breaking the buck."

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"Funds that broke the buck were as good as dead: investors would withdraw all their money," Paulson wrote.

That is precisely what happened following the collapse of Lehman Brothers in 2008. The Reserve Primary Fund, the nation's oldest money market fund, had $785 million in Lehman Brothers debt on the day of the investment bank's historic bankruptcy filing. Over the next two days, the $62 billion fund faced $40 billion in redemption requests, according to the President's Working Group report.

The Reserve Primary Fund was the only institution that broke the buck during the crisis, the PWG report states, because banks and other financial institutions that sponsored money market funds stepped in to bail them out. Still, during the week of September 15, 2008, investors withdrew some $310 billion or 15% of assets from prime money market funds, according to the report.

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