The Financial Stability Oversight Council was created as part of the 2010 Dodd-Frank reform law to identify risks and respond to emerging threats to financial stability. The FSOC exercised its authority for the first time last November, when the council issued recommendations to the Securities and Exchange Commission regarding the regulation of money-market mutual funds.
According to Donald N. Lamson and Sylvia Favretto of Shearman & Sterling, the FSOC has since been engaging in risky business, stating that, "depending on how the SEC reacts to these recommendations, detractors are likely to conclude the FSOC's authority is either toothless or too harsh."
Treasury Secretary Timothy Geithner, the FSOC's acting chairperson, pushed for the council to recommend heighted MMF regulation after three SEC commissioners announced they were against the original proposal.
When the FSOC issues final recommendations to an agency, that agency must adapt to the reform or specify reasons for not doing so within 90 days.
It is uncertain as to how the SEC will react to the recommendation for heightened standards for risky financial activities.
For the full piece see "FSOC's Risky Push for Money-Market Fund Reform" (may require subscription).
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