Asset Managers Say Money Funds Safe Without New SEC Rules

The $2.6 trillion money market fund business doesn’t need additional reforms being mulled by the U.S. Securities and Exchange Commission, according to executives of top asset managers.

“We are concerned that these changes will eliminate the utility of money market funds for most investors,” the executive committee of the Investment Company Institute said today in a statement. The committee said rule changes made by the SEC in 2010 were sufficient to safeguard funds.

Regulators and asset managers have been debating steps to make money funds safer since the September 2008 collapse of the $62.5 billion Reserve Primary Fund. Its closing triggered a run on prime money funds that helped freeze global credit markets.

The SEC is working on two proposals. The first would strip money funds of their traditional fixed $1 share price, substituting a floating value. The second would impose capital requirements and restrict redemptions.

The Washington-based ICI’s executive committee is responsible for evaluating policy alternatives for the group’s board of governors. Its members include executives from Vanguard Group Inc., Legg Mason Inc. and JPMorgan Chase & Co., according to the trade group’s website.

The committee doesn’t include any representative from BlackRock Inc. (BLK), the world’s biggest money manager. BlackRock said on March 2 that money funds could survive without their stable $1 share price if the plan included key additions.

Rather than fight the SEC, money managers should work with the agency to develop the best possible version of the reform proposal, the New York-based company said.

The SEC is expected to make its proposals public this month.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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