WASHINGTON - The Investment Company Institute yesterday announced a working group of money market fund industry leaders to develop recommendations to help "improve the functioning of the money market and the operation and regulation of funds investing in that market."
The panel, which will be headed by John J. Brennan, chairman of the Vanguard Group, will identify needed improvements in the market and industry practices; reforms that should be made to regulations, including the Securities and Exchange Commission's rules governing money market mutual funds; and possible legislative proposals. It plans to report its findings in the first quarter of next year, according to the ICI.
"Events in September and October underscore the vital role that the money market plays in the nation's economy as a source of financing for U.S. businesses, financial institutions, consumers, and municipalities," Brennan said in a release. "We hope to offer concrete, positive suggestions to improve the way the money market functions."
The Treasury in mid-September made its Exchange Stabilization Fund available to ensure money market funds were able to avoid "breaking the buck," which occurs when they are unable to maintain a $1 per share net asset value. The move was made after the Reserve Primary Fund broke the buck on Sept. 16, after suffering losses from investments tied to bankrupt Lehman Brothers. Tax-exempt issuers and money-market funds successfully gained access in mid-September to the Treasury's $50 billion temporary insurance program after they were initially not included.
Since then, tax-exempt money market funds have mostly had inflows, but suffered outflows of $1.96 billion for the week ending Oct. 27. At that time, 534 tax-exempt funds had $495.91 billion of total assets, down slightly from the $497.86 billion they accumulated the prior week, according to the Money Fund Report, a service of iMoneyNet.com of Westborough, Mass.
Members of the working group include: James H. Bodurtha, independent director, BlackRock Funds; Richard S. Davis, managing director, BlackRock Inc.; Mark R. Fetting, chief executive officer and president of Legg Mason Inc.; Martin L. Flanagan, president and CEO of Invesco PLC; George C.W. Gatch, president and CEO of J.P. Morgan Funds; John A. McGonigle, vice chairman and chief legal officer, Federated Investors Inc.; James A. McNamara, president and CEO of Goldman Sachs Mutual Funds; Randall W. Merk, executive vice president of Charles Schwab & Co. and president of Schwab Funds; Paul Schott Stevens, president and CEO of ICI; and Michael Wilens, head of asset management at Fidelity Investments.
