Late Wednesday night, SEC Chair Schapiro conceded that she cannot advance MMF reforms through SEC regular order. A compromise option – issuing a concept release instead of a specific proposal – was rejected in favor of a plea to other regulators now to do what they can to address the systemic risk Ms. Schapiro and other regulators believe is posed by these investment vehicles. In this report, FedFin assesses these options, what they would do to whom and the timing and process necessary to advance them. These options include FRB action to govern bank activity in and use of MMFs – the most likely near-term action. FSOC also has options, including both designating some MMF sponsors as systemic firms and/or calling MMFs a systemic activity or practice. FedFin believes firm designation the most likely FSOC path, but this will take considerable time due to complexities discussed in this report. The prospect for global MMF initiatives in light of the SEC decision is also assessed.
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