Mary Shapiro, Chair of the SEC, finds herself in an awkward position. As Investment News reports, she is trying to pass regulation that has the potential to keep money market funds from attracting the "systematically significant" label from the Financial Stability Oversight Board. But she has run into opposition from both the industry and some of her fellow commissioners for proposing a regulatory burden: either provide capital subordinate to the stable NAV shares to absorb fluctuations in asset values, or let the NAV float. The funny thing is that if the SEC fails in its regulatory efforts, the "systematically significant" designation will carry a consequence at least as burdensome.
I understand the marketing appeal of the stable NAV for a money market fund. However, I have to wonder about the judiciousness of an investment proposition that relies on an arcane accounting trick to fulfill its objectives. There are alternatives that have comparable yields, such as bank money market accounts. It seems that the hadnwriting is on the wall for money market funds.
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