Secs walter scolds money funds for fighting reform

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* Walter says money market funds need more reform* Says industry has not engaged in productive talks* Walter stops short of endorsing specific planBy Sarah N. LynchMarch 19 A U.S. securities regulator said more needs to be done to strengthen money market funds to protect investors and reduce the risk to other financial markets, and scolded the fund industry for not working with regulators on reform. Elisse Walter, a Democratic commissioner at the Securities and Exchange Commission, stopped short of endorsing specific reforms. But she said the reforms the SEC adopted in 2010 were not sufficient."I don't think that we can simply say that enough has been done - that the Commission's latest rules have addressed all of the problems," Walter said in remarks prepared for a fund industry conference in Phoenix, Arizona.

She also criticized the industry for bringing its dialogue with the agency "to an abrupt end."SEC Chairman Mary Schapiro has so far been unsuccessful in gaining enough support within the commission for a second round of reforms for the $2.6 trillion money market fund industry. She has said further steps are needed to stop potential problems at money funds from spreading throughout the financial system, as happened in the 2008 credit crisis when the Reserve Primary Fund "broke the buck" with its net asset value falling below $1. The agency is considering requiring that funds set aside capital against losses, restrict a portion of withdrawals or eliminate fixed share prices.

But the agency is facing stiff opposition, from the industry and from several SEC commissioners. The critical holdouts include Republican Commissioners Troy Paredes and Dan Gallagher, as well as Democrat Luis Aguilar, who have all questioned the need for additional reforms. They point to a series of new SEC rules adopted in 2010 that tightened credit quality standards, shortened the maturities of fund investments and imposed a new liquidity requirement, among other things.

Walter's openness to reforms would not change the vote count on the five-member commission. Since Schapiro first laid out her vision for reforms in November of last year, the money fund industry has gone on the offensive and kicked its campaign into overdrive. In recent weeks, major fund managers, including Fidelity, have come to Washington to meet with reporters to discuss their position. The Investment Company Institute, the trade group for the mutual fund industry, has been regularly posting blogs attacking the SEC's reform plans. Walter in her speech had harsh words for those tactics, saying they were unproductive."I would like encourage you to move away from media statements and instead move back to building upon the discussion of the past two years," she said."I understand that there is risk in moving ahead with additional reforms - especially in a time of low yields. However, there is also significant risk in not acting."