The Securities and Exchange Commission will host a roundtable discussion tomorrow “on the potential effectiveness of certain options in mitigating systemic risks associated with money market funds,” according to a statement published on Sunday.

Roundtable participants will be from the Financial Stability Oversight Council, as well as sponsors of money market funds, short-term debt issuers, investors, and the academic community, said the Commission in the document.

The options for mitigating risks that will be discussed include the money market fund reforms proposed in the President's Working Group report from October, among others. These range from the SEC implementing certain measures to broader changes requiring new legislation, coordination by multiple government agencies, and the creation of new private entities, according to the report.

For example, the SEC could amend rules to require money market funds to adopt floating net asset values or to require large funds to meet redemption requests. A coordinated effort by the SEC, bank regulators, and financial firms would be necessary, however, in order to put in place private emergency liquidity facility, insurance for money market funds, conversion of the funds to special purpose banks, or a two-tier system of the funds that might combine some of the other measures.

The Commission is accepting public comments submitted to the file for the President's Working Group Report on Money Market Fund Reform. So far, 89 comments have already submitted on the proposed reforms, largely from banking groups. The initial comment period ended on January 10.

Many commenters from financial organizations and associations opposed measures that would alter the regulatory framework fundamentally, such as Goldman Sachs in its January 10 letter or the Financial Services Institute. “We believe efforts to impose floating net asset values on money market funds would result in substantial alterations to and negative unintended consequences for investors,” said the Dale E. Brown, chief financial officer of the institute in his January 10 letter.

These letters note that new rules that the SEC has already passed to improve money market funds' liquidity and transparency may be sufficient.The SEC passed a rule on February 23, 2010 to tighten the risk-limiting conditions for money market funds, among other things. “The Association for Financial Professionals is in favor of allowing these recently-adopted rules to serve their intended purpose before instituting any of the President's Working Group's proposals, which are likely to eliminate money market funds as a viable investment alternative for many corporate investors,” said Joseph Meekand, chairman of the association's Government Relations Committee, and Denise Laussade, chairman of the Committee's Financial Markets Task Force, in a letter from January 2010.

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