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Us chamber report sees no need for more money fund reforms


* Report touts success of SEC's 2010 fund reforms* Also finds funds withstood 2011 eurozone crisis* Warns against SEC imposing new reforms on industry* SEC, FSOC mull possible actions on money fund reforms* FSOC slated to meet in closed session ThursdayBy Sarah N. LynchWASHINGTON, Oct 16 Money market fund regulations adopted by U.S. securities regulators in 2010 reduced risks in the $2.5 trillion industry, according to a report sponsored by the U.S. Chamber of Commerce that questions the need for further reforms. The report drafted by three finance and economics professors concludes that the Securities and Exchange Commission's 2010 rules have left money market funds more liquid and better able to withstand a wave of customer withdrawals.

The report says the industry weathered the economic turmoil in Europe in 2011 despite an uptick in redemptions, and did not pose any systemic risk to the marketplace."Given the remarkable stability of the industry in the summer of 2011 during the eurozone crisis and uncertainty about whether the U.S. would raise its debt ceiling, we question whether there is sufficient evidence to support additional reform," says the report by David Blackwell and Kenneth Troske from the University of Kentucky, and Drew Winters of Texas Tech University. The 2010 reforms tightened credit quality standards, shortened weighted average maturities, imposed a liquidity requirement on money market funds and increased disclosure of fund holdings. The report is the latest effort by the Chamber of Commerce to fend off efforts by SEC Chairman Mary Schapiro and the U.S. risk council to impose another round of rules on the money market fund industry.

The chamber released the report just two days before the Financial Stability Oversight Council, or FSOC, is slated to meet behind closed doors where the topic of money market funds is expected to be discussed. Last month, Treasury Secretary Timothy Geithner said FSOC will begin considering new reforms after Schapiro failed to attract the three SEC votes she needed to advance her own plan. Schapiro has argued that more regulations are needed to prevent another run like the one seen in the 2008 financial crisis when the Reserve Primary Fund "broke the buck" and saw its net asset value fall below $1 per share. She had hoped to put out a proposal for public comment with two key components. One would have called for new capital buffers and redemption restrictions in a time of chaos. The other explored moving to a floating net asset value.

Banking regulators are supportive of her efforts. In a report on Monday, a group of researchers at the Federal Reserve Bank of New York argued for new rules, saying funds could delay full redemptions from all customers at all times to encourage investors to look closely at a fund's risk before putting in money. But the money market fund industry worries that new rules would drive money out of their funds into bank accounts at a time of very low interest rates. Opposition to the reforms has also been mounted by many companies and local-government agencies that rely on money funds to buy their short-term debt instruments. Three SEC commissioners - Democrat Luis Aguilar and Republicans Daniel Gallagher and Troy Paredes - have also expressed skepticism, and have said they wanted to first study the effects of the 2010 reforms before proceeding with new rules. The SEC's economists are currently conducting the study requested by the three commissioners, and results could come out in a few weeks, according to one person familiar with the matter. Despite his resistance to Schapiro's original proposal, Gallagher has said he hopes the agency will consider a fresh package of reforms, and that he would be open to considering a floating net asset value coupled with allowing fund boards to impose liquidity "gates."Meanwhile, Geithner has said FSOC will likely weigh a package of money market reforms at its November meeting. Eventually, he hopes to present those suggestions to the SEC for consideration. Under the Dodd-Frank financial oversight law of 2010, the SEC would need to adopt FSOC's suggestions, or reject them in writing within 90 days.

Your money giving to charity gears up after a crisis


Nov 30 During the first two weeks after an earthquake hit Nepal in April, Fidelity Charitable sent out 4,400 grants totaling almost $5.3 million from donors using special charitable accounts called donor-advised funds at the Boston-based nonprofit associated with Fidelity Investments. Now a few months later, the total is up to 6,000 grants totaling $7.8 million. Within hours of something bad happening around the globe - whether its a hurricane or a humanitarian crisis like the flow of refugees from Syria - people start calling places like Fidelity Charitable, to ask where their donations would be most useful. In the philanthropic circles, motivating folks to give can be a costly and fickle marketing exercise. Donor-advised funds, which operate like mini-foundations, help to bridge the gap."What we know about individuals, when it comes to disasters, is that they are highly influenced by media coverage and by the type of disaster," said Bob Ottenhoff, president and chief executive officer of the Center for Disaster Philanthropy, a nonprofit based in Washington. "That is why so much money flows immediately after there is a certain type of disaster, and it dries up after a couple of days."Individuals gave an estimated 72 percent of the $358.38 billion donated to charity in 2014, according to Giving USA, with the rest coming from foundations and corporations.

Donor-advised funds make up a very small but growing part of that individual pie, granting $12.5 billion in 2014, up from $9.7 billion in 2013, according to the National Philanthropic Trust, which operates a donor-advised fund. And overall assets held in those accounts rose to $70 billion from $58 billion. At Fidelity Charitable, one of the largest providers, you will need $5,000 to open a donor-advised fund. Most of those who open accounts like these have planned giving on their minds - to their alma maters, religious organizations, health concerns or local communities. But account holders at Schwab Charitable, for instance, leave about 30 percent of their assets free to fund causes that come along."It's hard to know how many are pulling a credit card out and donating directly rather than using their donor-advised funds," said Kim Laughton, president of Schwab Charitable . "But I think they understand they can do it quickly through the fund. They can even grant from a cellphone, which is really nice."

The advantages of giving through a donor-advised fund are that the money can be set aside and noted on tax returns, but granted later. Also, the fund groups take care of much of the paperwork involved in a donation - especially helpful for non-cash gifts like stocks or even Bitcoin, at some organizations. Donors should note, however, that brokerage management fees do apply to the accounts, as in regular investment accounts. While Fidelity and Schwab send out email blasts and newsletter updates to their donor bases when a major disaster occurs, they worry about creating disaster-giving fatigue. This has made some other donor-advised funds very cautious about pushing out notices.

"We wait for donors to come to us, rather than becoming an annoying dinging to them," said Eileen Heisman, president and CEO of the National Philanthropic Trust. All the funds are especially cautious about looking beyond the immediate emotional need to help when they select charities to highlight. That is what Fidelity tried to steer with its Nepal effort, said Elaine Martyn, vice president of the private donor group at Fidelity Charitable. While the website highlighted just a few charities to start, by the time those 6,000 grants were given out, they went to hundreds of different organizations like Doctors Without Borders, Save the Children and smaller ones that focused on eye health and animal welfare, many of which will be providing long-term support for rebuilding."Lot of donors want to give to the first responders, then they forget about it. There's a whole other set of organizations that are good at hanging in there," added Heisman. Ottenhoff suggests breaking up gifts into two parts, one for immediate need and one for long-term building."It should be a time to take a moment of reflection - what do you want to accomplish? What organization can do it?" he said.