Schapiro's Circulation Of Report To Congress Was The Deciding Factor In The Dissenting Vote; But There's Still The FSOC To Contend With

Schapiro’s inability to rally more than three of the five SEC governors to her cause has tainted her influence and, possibly, her leadership. But the FSOC is not all powerful.
One way the FSOC could jockey its position is to recategorize money funds as non-bank financial institutions. This would open the door for the Federal Reserve to step in as money-fund regulator.
Just how powerful the FSOC is may be the next point of contention. The FSOC thinks it has unlimited powers but industry participants do not.
Three big firms are deeply involved in the contest of power. Fidelity Investments and JP Morgan have money funds totaling $406 billion and $241 billion respectively. Federated has $228 billion but is happy to take funds off the hands of any institution that no longer wants them.
In just over three years, Federated has added $6 billion in money funds through three acquisitions in spite of the SEC’s push for reforms. So it looks like the money fund industry is not even close to being dead.

The fact that Schapiro went directly to Congress with the report was deemed a poor tactic. The report listed hundreds of money fund firms—including that of this particular commissioner—that Schapiro said needed further regulation.


Commissioner Luis Aguilar agreed with other financial industry professionals that the additional regulations would make the marketplace more vulnerable to less regulated cash-like instruments.


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