[ by Howard Haykin ]

Some former high-profile SEC officials are urging the U.S. financial risk council to back down from its efforts to pressure the SEC into adopting new reforms for the $2.6 trillion Money Market Fund industry. 

Four former SEC Chairmen, 5 former Commissioners, 6 former Senior Staffers signed a letter dated 2/20/13, to the Financial Stability Oversight Council ("FSOC"), urging that panel to "respect the jurisdiction, independence, subject-matter expertise and regulatory processes" of the agency.   Former SEC Chairmen Roderick Hills, David Ruder, Richard Breeden and Harvey Pitt, as well as former Commissioners Roel Campos and Paul Atkins, were among the signatories. 

"We believe strongly that there are compelling reasons the council should forbear from intervening in the SEC's rulemaking process."

"This conclusion is based upon the superiority of the SEC to the council as an expert, bipartisan regulator and the long-term corrosive effect on the SEC of disregarding determinations by a majority of the commission's members."

The former officials were not unified on everything.  They differed on the substance of the proposed reforms, saying they have varying opinions.

The risk council continues its review of public comments on a proposed regulatory framework that is intended to help prevent runs on money market funds.  The FSOC is chaired by the Treasury secretary - formerly Tim Geithner - and comprises some of the country's top banking and market regulators.  The FSOC initially got involved in this subject after former SEC Chairman Mary Schapiro postponed a vote on MMF reforms by her SEC Commissioners because she did not a majority support.

Tim Geithner became a vocal supporter of money market reform and he vowed to push it through, one way or another.  The matter began to run out of steam as the Budget Debate and Concern for the Fiscal Cliff took precedence on Capital Hill.   Then any remaining steam in the balloon was lost with the announcements that Ms. Schapiro and Mr. Geithner would be stepping down from their government positions.

The FSOC was created under a mandate of the 2010 Dodd-Frank Reform Act.  The law empowers the Council to try and pressure regulators to act, though the FSOC cannot force the SEC to follow its recommendations.

If the SEC does not act on its own, the FSOC may formally present the SEC with its reform recommendations.  The SEC would then have 90 days to accept or reject the recommendations. 

Notwithstanding protests from the former SEC Officials and other critics, the FSOC continues to consider reforms that largely mirror those endorsed by Ms. Schapiro.

For further details, go to:   [Reuters, 2/21/13].