RD News 7Feb12

• WSJ: SEC to unveil MMF plan
• Funds must boost their capital reserves in one of three ways: by injecting more cash from corporate coffers; issuing stock or debt securities; or collecting more money from shareholders.
• Investors who wish to sell all of their holdings at once would be able to get only about 95% of their money back immediately, with the remaining 5% returned to them after 30 days.
• Paul Schott Stevens, president ICI, said the ideas under consideration by the SEC could "force an enormous number of sponsors out of the business and leave those that remain with a product that nobody will want to invest in or make available to investors."
• Christopher Donahue, president and CEO of Pittsburgh-based Federated Investors Inc., which manages $255.9bn of money-fund assets, said he plans to sue the SEC if the new regulation interferes with his firm's ability to do business.

• Reuters: Fidelity MMF clients react negatively to SEC proposals
• Half of Fidelity’s money fund clients would move all or some of their assets out of the investments if the net asset value of the funds was allowed to fluctuate.
• Fidelity tested versions of a holdback feature, and said 52% of retail investors surveyed would invest less, or stop investing altogether, in money market funds if a 3% holdback feature was instituted on redemption. Results did not change significantly when the holdback was dropped to 1%.
• "Given the importance retail investors place on the liquidity feature of money-market mutual funds, it is not surprising that investors reacted so negatively to a potential rule that would restrict access to principal."

• Tim Geithner: The state of financial reform
• As we move forward, we want to get the reforms right so that they will endure as the market evolves. We are trying to be careful to look not just at the individual rules in isolation, but also the way rules interact with each other and the broader economy. We want to be careful to get the balance right—building a more stable financial system, with better protections for consumers and investors, that allows for financial innovation in support of economic growth.
• We need a more level playing field globally. This is particularly important in the reforms that toughen rules on capital, margin, liquidity, and leverage, as well as in the global derivatives markets.

• FSA: Delivering ‘twin peaks’ within the FSA
• Firms will be supervised by two independent groups with independent objectives, who will engage in “independent but coordinated regulation”.
• Change from the “old style reactive approach” to the “new style proactive approach”, and emphasised the importance of clarity of regulatory objectives, which he argued the FSA did not have.
• He argued that in a judgment-based regime, mistakes would be made, but that society must recognise that this is a by-product of the new approach, rather than simple failure.

• BoE: Chris Salmon (ED Banking Services & Chief Cashier): Three principles for successful financial sector reform
• First, it is better to manage the costs of change by having a long transition period than to water-down the reform so that change can be implemented more quickly.
• Second, we need strong dialogue between public authorities to maximise consistency of approach. We need strong and open dialogue between market participants and the public authorities to understand the potential impact of the proposed reforms.
• Finally, we need to recognise the limits of foresight and build in mechanisms so that rules can be amended, recalibrated or adjusted to take account of future developments.