| WASHINGTON, July 22
WASHINGTON, July 22 The U.S. Chamber of Commerce
made a last-ditch plea on Tuesday to federal securities
regulators, urging them not to adopt rules that will change how
some money market funds are valued and could cause companies to
park their cash elsewhere.
In a lengthy call with reporters, Chamber officials along
with corporate and municipal treasurers said they are vehemently
opposed to the proposal slated to be adopted by the U.S.
Securities and Exchange Commission on Wednesday morning.
They said they are especially alarmed by a provision that
would force money market funds used by corporate treasurers and
institutions to float their share price.
"We are still not convinced that the very limited, marginal
benefits arising of implementing a floating net asset value
exceeds any of the very substantial costs that are certain to
come," said Alice Joe, a managing director for the Chamber's
Center for Capital Markets Competitiveness.
The SEC has been careful not to divulge details on how the
final rule will come out, but people familiar with the matter
have said the agency is expected to adopt a two-pronged rule.
The first measure will require prime money market funds to
switch from a stable $1 per share net asset value (NAV) to a
floating NAV, in an effort to reduce the risk of investor runs
experienced during the 2008 financial crisis.
A floating NAV is seen by some as less prone to financial
shocks because it will curb investor complacency over the stable
$1-per-share value that funds currently quote.
The second measure would permit fund boards to lower
redemption "gates" or charge fees in times of market stress.
The Chamber has been one of the most vocal groups in
opposition to the SEC's money market reform plan.
It has organized a broad coalition of companies and
municipalities to combat the rule, and at one point even
blanketed Union Station near SEC headquarters with posters
lobbying against the effort.
The Chamber is one of the few major trade groups in recent
years that has been unabashed about going toe to toe with the
SEC in court over rules it has opposed.
It has won a handful of cases by arguing that the SEC
violated rulemaking procedures or failed to properly weigh the
economic costs and benefits of its rules.
Tuesday's call with reporters featured a handful of
corporate and municipal treasurers who all rely heavily on prime
money market funds for short-term funding and cash flow
Verett Mims, an assistant treasurer for The Boeing Company
, said Tuesday that of the $2-3 billion Boeing has
invested in money funds, roughly 70 percent sits in prime funds
that would be affected by the SEC's rule.
If prime funds are forced to have a floating NAV, "We would
actually have to start moving our money," Mims told reporters.
"Prime funds of course offer the most amount of liquidity
and flexibility. If that flexibility is gone, then we really
wouldn't want to be invested in those funds."
Part of the Chamber's concern with a floating NAV centers on
a fear it will trigger burdensome tax rules that will require
investors to track numerous tiny gains and losses.
The Treasury Department and the SEC have been working to
come up with a fix for the problem, but have yet to tell the
public any details.
The Chamber and corporate treasurers called on the SEC to
hold off implementing money fund rules until the Treasury's plan
can be properly vetted.
The SEC said last year the Treasury was exploring a fix that
would simplify fund investors' tax returns.
But treasurers said Tuesday they fear that solution falls
short, and that the Internal Revenue Service may actually lack
the power to grant full relief from the tax rules unless
Joe declined to say whether the Chamber might file a legal
challenge to the rule.
However, she noted that if the SEC proceeds to adopt a
floating NAV without giving the public a chance to comment on
the tax implications, it will weaken the quality of the agency's
economic analysis justifying the rule.
"It raises the question of how does this impact the SEC's
cost benefit analysis if they don't have the benefit of public
comment," she said.
(Reporting by Sarah N. Lynch; editing by Andrew Hay)