Reuters: Regulatory News: UPDATE 1-BlackRock, others in talks on money market compromise

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UPDATE 1-BlackRock, others in talks on money market compromise Oct 26th 2012, 18:28 Fri Oct 26, 2012 2:28pm EDT * BlackRock's Fink: Firm has "industry supported solution" * Federated CEO says "constructive dialogue continues" By Jessica Toonkel NEW YORK, Oct 26 (Reuters) - Officials from BlackRock Inc , Fidelity Investments and other mutual fund operators are meeting Friday with U.S. regulators to discuss a potential compromise for reform of the $2.5 trillion money market industry. BlackRock, the world's largest money manager, and Fidelity, the largest manager of money market funds, had opposed a prior proposal from Securities and Exchange Commission chairman Mary Schapiro intended to make the funds more stable in times of financial crisis. But renewed pressure from regulators since Schapiro's plan died in August have stimulated another effort to find a compromise. The firms are going to meet with officials from the Securities and Exchange Commission and the U.S. Treasury Department to discuss what they see as an "industry supported solution," BlackRock Chief Executive Laurence Fink said Friday in an interview with CNBC. Fidelity spokesman Vin Loporchio confirmed that Fidelity representatives were attending the meeting. He declined to comment on details of the talks. The SEC and the fund industry's primary trade group in Washington, the Investment Company Institute, declined to comment. Calls to the Treasury Department were not immediately returned. Regulators started looking at money market funds in September 2008 after the Reserve Primary Fund, one of the largest money funds at the time, suffered losses on Lehman Brothers debt and could not maintain its $1 per share net asset value, an event known as "breaking the buck." The event ignited a run of withdrawals from investors across the industry, forcing the government to step in and back the funds. In August, the Financial Stability Oversight Council, the federal multi-agency regulator established by the Dodd-Frank reform act to oversee financial risk, took up money market reform after SEC Chairman Mary Schapiro said she did not have enough backing from her fellow commissioners to advance her proposed reforms. A letter from Treasury Secretary Tim Geithner last month offering potential reforms stimulated further talks, according to Christopher Donahue, chief executive of Federated Investors , the third-largest manager of U.S. money funds. "Constructive dialogue continues," he said on Friday on a call with analysts. The company declined to comment on whether it attended Friday's meeting. JPMorgan Chase, the second-largest money fund manager, also declined to comment. Under a recent public proposal from BlackRock, money market funds, which typically have 30 percent of their holdings in assets that can be converted to cash within five days, would be frozen if liquidity fell to 7.5 percent. At that time, investors wanting to pull money out of the funds would have to pay a fee that would go back into the fund, according to a September paper published by BlackRock outlining the proposal. News of the meeting was first reported by Bloomberg. Link this Share this Digg this Email Reprints

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