Bankers who manage money market mutual funds are troubled by a new Securities and Exchange Commission proposal that would required detailed disclosure of the securities in those portfolios.
Several bankers contacted expressed concern that the new proposal would burden them with needless record keeping without really making those funds any safer for customers. At the same time, they said that their fund complexes would be obliged to pass on the added costs of regulatory compliance to investors.
"You can get into a situation with regulation that represents a triumph of form over substance," said Leonard M. Spalding, chief executive of Chase Manhattan Corp.'s Vista Capital Management.
These concerns about added regulation come at a time when the bank industry's stake in managing money markets is growing. Bank-managed money market funds represent 30% of the $746 billion in U.S. money fund assets - up from 20% in 1992, according to Lipper Analytical Services.
Currently, money fund managers are required to provide basic portfolio information to the SEC every six months, and they aren't required to list their holdings.
But the new proposal would require fund complexes to report quarterly about each security in a portfolio. The report would have to include details on each security's credit quality, value, and maturity date.
The proposal, which first appeared in the Federal Register in July, underwent a public comment period which ended in late September. The SEC will be reviewing those comments in the coming weeks, a spokesman said.
Meanwhile, the Investment Company Institute, the fund industry's leading trade group, has launched a lobbying campaign designed to defeat the proposal. It wants the SEC to adopt an alternative proposal that would require more general money fund reporting on a monthly basis.
In a letter to the SEC, the institute said that a fund group with 30 money funds might have additional accounting expenses of $400,000 a year if such a proposal were adopted.
Bankers seemed to agree with the Investment Company Institute's position.
"There's enough disclosure already both as a result of current SEC requirements and our own internal compliance," said Gary Madich, chief investment officer for fixed income with Banc One Invesment Advisors, a subsidiary of Banc One Corp., Columbus, Ohio.
"This would represent another layer of costs that would reduce returns to customers," Mr. Madich said.
Added Mark Williamson, the top executive with NationsFunds, the proprietary fund family of Charlotte, N.C.-based NationsBank Corp. "The ICI has the right take on this. Advisers should be reporting only on the issues that are substantially important to the safety and soundness of a money fund."
