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Dechert Submits Letter to Financial Stability Oversight Council Regarding Treasury Secretary Geithner’s Proposed Agenda for the FSOC to Take Money Market Fund Actions
November 1, 2012
Dechert News Release

Thomas P. Vartanian, chair of Dechert LLP’s Financial Institutions practice, has sent a letter to the Financial Stability Oversight Council (FSOC) in regard to Treasury Secretary Geithner’s September 27, 2012 letter to members of the FSOC concerning recommendations for actions by the FSOC in regard to Money Market Funds (MMFs), including recommendations to the Securities and Exchange Commission (SEC) regarding reform of the MMF regulatory structure.

“The Secretary’s proposal seeks to have the FSOC make recommendations to the SEC for MMF reform before it has established a fair process for considering and evaluating such recommendations and without addressing how the statutory requirements for consultation with the SEC, determining eligibility for a recommendation, conducting a comprehensive cost benefit analysis and considering public comments will be satisfied,” Vartanian said. “We have asked the FSOC to act in a careful, deliberate manner in evaluating any possible recommendations to the SEC regarding changes in the regulatory structure for MMFs.”

Dechert’s letter discusses a series of issues that the FSOC must consider in connection with any potential MMF recommendation:

  • What internal agency rules will define the FSOC’s exercise of its section 120 authority to ensure the appropriateness of the process, and the absence of bias and predisposition of relevant issues?
  • How can the FSOC conclude that MMFs come within its statutory purview over “nonbank financial companies” when the Board of Governors of the Federal Reserve System has not completed the necessary regulatory action under Dodd-Frank to define that term?
  • Has the FSOC determined that MMFs are engaged in “financial activities” that pose the financial stability threat required under section 120?
  • How will the FSOC consult with the SEC commissioners and key SEC staff who are most knowledgeable about how MMFs work and are regulated?
  • What will be the parameters of the required analysis of the costs to long-term economic growth (Cost Benefit Analysis) associated with each proposed recommendation?
  • How will the FSOC’s notice and request for comment on any proposed recommendations address the requirements of the law, including the need for public comment on the Cost Benefit Analysis?
  • How will the FSOC inform the public of its responses to the comments that it receives and of the basis for any final recommendations it may make to the SEC?

Click here to download the letter (PDF).