Reuters: Regulatory News: UPDATE 1-Federated sees reduced 2nd-qtr fee-waiver impact

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UPDATE 1-Federated sees reduced 2nd-qtr fee-waiver impact Apr 27th 2012, 17:10 Fri Apr 27, 2012 1:10pm EDT * Fund waivers roughly Q2 $20 mln pretax hit -CFO * Waivers cut pretax income $22.3 mln in first quarter * CEO: regulators want to push cash from money funds to banks April 27 (Reuters) - Fee waivers on money market mutual funds could reduce second-quarter, pretax income at Federated Investors Inc by around $20 million, a decrease from last quarter, Chief Financial Officer Thomas Donahue said on Friday. Federated, the third-largest U.S. manager of money market funds, has been forced to waive some of its fees to prevent yields from going negative. In the first quarter, the waivers cut pretax profit by $22.3 million, Federated reported after the market closed on Thursday. One reason fee waivers declined more than expected in the first quarter was because yields on some money market instruments rose more than expected, Donahue told analysts and investors on a conference call on Friday. Those rates may fall slightly in the second quarter, but not to the "dismal levels" seen toward the end of 2011, Deborah Cunningham, Federated's executive vice president for money funds, said on the call. Shares of the Pittsburgh asset manager were up 0.2 percent at $21.42 on Friday afternoon on the New York Stock Exchange. Most of Federated's total managed assets - $363.6 billion at March 31 - were held in money funds and related separate accounts and have been suffering from low interest rates. Low rates have forced the firm, like many of its peers, to waive fees just to keep investors from fleeing. The waiver impact of $22.3 million in the first quarter was less than the $27 million Federated had estimated several months earlier. The figure was up from a $13.1 million impact in the same quarter a year ago, but lower than the $26.1 million impact during the fourth quarter of 2011. OPPOSING REFORM U.S. regulators are discussing additional rule changes for money funds after the financial crisis, such as requiring the funds' net asset value to vary from $1 per share. Federated and other fund firms have said no further changes are needed and such plans could drive away customers. Federated Chief Executive Christopher Donahue, a vocal opponent of more changes, on Friday's call reiterated several industry arguments against the proposals. Fed officials would prefer investors to move cash to banks overseen by the Fed, he said. "The regulators are trying to push money into the big banks," he said. Donahue said he did not know the timing of any possible proposal from the main regulator of money funds, the U.S. Securities and Exchange Commission. "We don't know whether they are on the brink of a proposal," he said. SEC Chairman Mary Schapiro, a critic of the current situation, last fall had predicted a proposal in the first quarter of this year. But that was before other commissioners expressed skepticism of the need for additional rules. Link this Share this Digg this Email Reprints

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