August 15, 2012
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Dear Chairman Schapiro:
This is a form letter and I realize that this makes it of limited value.
With that in mind I am asking you to refrain from fixing something that is not broken. A money market fund is an investment not a guarantee. If someone wants a guaranteed return they can purchase a CD or a treasury bill, note or bond. I feel that after 43 years in the investment industry that I have more than a little institutional knowledge to draw on and given that I do not believe your contemplated actions are improving something but rather just making it different. Money market funds are fine the way they are, they are an option for investors not a requirement and as a result there is a certain degree of inherent risk. This does not make them bad, this is not a flaw, this is simply part of what they are and it is fine just the way it is.
Thank you for your consideration,
As someone who has depended on the utility, stability and liquidity of money market funds (MMFs), I am writing to express my strong opposition to the various regulatory proposals being considered by the SEC. Each would destroy a fundamental reason why the funds have become such a popular and useful cash management product. Contrary to what some regulators may want us to believe, the vast majority of users well understand that MMFs are investments which are not guaranteed by the government or anyone else.
One of the hallmarks of MMFs is the stable, $1.00 net asset value. A move to adopt a floating NAV would create accounting nightmares for users, requiring us to track increases or decreases (literally fractions of a penny) in share price each time shares are bought or sold.
The liquidity of MMFs is an equally important aspect of their utility.
Instituting redemption restrictions of any kind, at any time, is just a bad idea. I know of no other widely used cash management vehicle that tells customers that they may not have full access to their investments when they want it or need it. Such a freeze would also cripple sweep accounts, fiduciary accounts and a number of other popular money market fund benefits.
Finally, any proposal to require money market funds to maintain "capital buffers" or reserves would further limit the attractiveness of the investment. This would only serve to decrease the yield on the fund while such a buffer was being built. In the current rate environment such a concept seems untenable and to fail even the most rudimentary cost/benefit analysis.
Given the significant negative impact that any of these proposals will have on those who rely on money market funds, I hope that the SEC will take my views into consideration. I ask you to look closely at the fallout that would ensue and abandon the effort to regulate MMFs out of existence. Money market funds are working well and none of the alternatives available provide the same flexibility, yield and value.