SEC’s Money-Fund Rule Boosted by Economic Study, Paredes SaysDave Michaels
A revised proposal to limit the systemic risk posed by money-market mutual funds shows how economic analysis can improve financial regulation, Securities and Exchange Commission member Troy A. Paredes said today.
The SEC measure released in June reflects the progress the agency has made in studying the costs and benefits of new rules, Paredes said at an event sponsored by the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness.
“That proposal laid out in pretty crisp terms, ‘this is what we are trying to achieve subject to the following constraint,’’ said Paredes, who is scheduled to step down as a commissioner this month. ‘‘When you read that document, you understand the starting point and the subsequent analysis which adds to the transparency of government.’’
Paredes, a law professor who joined the SEC in 2008, has pushed the agency to analyze how rules affect competition and capital formation. Federal courts have invalidated SEC rules for inadequate economic analysis, including last month when a U.S. district judge tossed out a rule mandating disclosure of payments by oil and gas companies to foreign governments.
The money-market mutual fund proposal, which was backed by Paredes and fellow Republican Commissioner Daniel M. Gallagher, would impose a floating-share price on the riskiest funds that cater to institutional investors and buy corporate debt. The five-member commission coalesced around a money-funds measure after an effort in 2012 splintered the agency under former Chairman Mary Schapiro.
The commission has improved how it includes economists in rulemaking but still employs too few, he said today.
‘‘The release really reflects the benefit, frankly, of rooting what we do in economics and rooting what we do in the data,’’ Paredes said.