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Global regulators pledge to reform money market fund rules

James Langton Companies International Organization of Securities Commissions Facebook LinkedIn Twitter Now, the head of the International Organization of Securities Commissions (IOSCO) says that it still intends to push for reforms in this area of financial markets. The chairman of the board of IOSCO, Masamichi Kono, issued a statement indicating, “I have taken careful note of Mary Schapiro’s statement on money market fund reform in the United States. While refraining from directly commenting on a statement of the chair of a member organization, I would like to reaffirm that IOSCO will continue its work on the basis of the mandate given to it by the G20 heads of state and the [Financial Stability Board], to develop policy recommendations for strengthening oversight and regulation of the shadow banking system, including money market funds.” Kono noted that IOSCO’s committee on investment management will meet at the end of August to consider the public feedback it received on a consultation report published back in April, which made recommendations for regulatory reforms to mitigate the risk of runs on money market funds, and other systemic risks. He said IOSCO’s board will determine its next move at a meeting in Madrid in October, and will report to the G20 finance ministers meeting in November. It had been slated to develop policy recommendations by July of this year. The report from IOSCO’s technical committee sought comment on a variety of policy options including mandating a move to variable net asset value, or other alternatives, in an effort to lower the expectation that funds can’t suffer losses, which would reduce the risk of a run when a fund fails to live up to those expectations. It also proposed reforms to valuation and pricing frameworks to increase price transparency; liquidity management measures to ensure that fund managers can meet redemptions; and, reforms to reduce the reliance on credit ratings and encourage the establishment of stronger internal credit risk assessment practices. In the wake of last week’s dust up at the U.S. Securities and Exchange Commission (SEC) over proposed new rules for money market funds, global securities regulators pledged to continue to pursue reforms to address the systemic risks posed by those sorts of funds. Last week, SEC chairwoman, Mary Schapiro, declined to put proposed new regulatory reforms for U.S. money market funds to a vote, on the basis that the majority of the commissioners intended to vote against the proposals. Opposing commissioners expressed concern about the impact of the proposals on the fund industry, and the risk that tighter rules could push investors into less-regulated alternatives. Share this article and your comments with peers on social media read more