S.E.C. Member’s Role in Failed Mutual Fund Reform

The following is an excerpt from an article in 

The New York Times
Monday, August 27, 2012

S.E.C. Member’s Role in Failed Mutual Fund Reform

By NATHANIEL POPPER

Luis A. Aguilar, one of five members of the Securities and Exchange Commission, is generally known as one of its strongest advocates for tougher oversight of the securities industry. In public statements this year, he has pushed his S.E.C. colleagues to be more aggressive, contending that the commission was not protecting investors assiduously enough.

But last week, Mr. Aguilar derailed one of the most significant current efforts to tighten regulations on the financial industry. His opposition to a proposal put forward by the S.E.C. chairwoman, Mary L. Schapiro, which was intended to improve the safety and soundness of a popular investment, money market mutual funds, put Mr. Aguilar in lock step with the powerful and aggressive mutual fund industry in which he worked as a lawyer from 1994 to 2002. Mr. Aguilar’s decision to oppose Ms. Schapiro’s plan last week became the third and deciding S.E.C. vote against the proposal.

His public criticisms of the approach taken by Ms. Schapiro closely echo those made by the industry in its fierce lobbying effort to scuttle a regulatory plan that had won support from nearly every top financial regulator, including the Federal Reserve chairman, Ben S. Bernanke, and Treasury Secretary Timothy F. Geithner.

It is not uncommon, of course, for regulators to side with the industries they oversee. But Mr. Aguilar has been adamant that he is not against prudent reform. He has said instead that he wants to be sure regulators have enough information before they move forward with new rules.

Behind the scenes, though, Mr. Aguilar had not requested that additional information, according to people briefed on his actions in recent months.

In his statement outlining his opposition to Ms. Schapiro’s plan, for instance, he said “there are larger macro questions and concerns about the cash management industry as a whole” that needed to be studied before the S.E.C. could move forward with efforts to improve money market funds. Mr. Aguilar did not mention the need for further study to Ms. Schapiro until two days before he went public with his opposition last week, commission officials said.

Possible changes to money market funds have been discussed within the agency for over a year, and Ms. Schapiro distributed the 414-page proposal in June to the four other members of the commission, including Mr. Aguilar. During that time, S.E.C. staff members made numerous overtures to Mr. Aguilar to address any concerns he might have had about the proposal, but most were rebuffed, the people said. On the other hand, Mr. Aguilar met with mutual fund companies 11 times this year as the proposal was being developed, according to S.E.C. records.

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U.S. Chamber Calls for Tax Reform as U.S. Corporate Rate Becomes Highest in the World

Says United States Should Adopt Simpler System with Lower Corporate and Individual Rates and Territorial System

WASHINGTON, D.C.—U.S. Chamber of Commerce Executive Vice President for Government Affairs Bruce Josten issued the following statement today ahead of the U.S. corporate tax rate becoming the world’s highest on April 1, 2012:

“In just a few days, the United States will hold the dubious distinction of having the highest corporate tax rate in the world. By simply standing still, we are falling behind. We need fundamental, comprehensive tax reform to improve our tax system, strengthen the economy, and help American companies compete and win.

“The United States tax system is increasingly out of step with the world economy and its competitors’ tax systems. As countries such as Canada and the United Kingdom have moved to reform their tax systems and lower rates to encourage economic growth, America’s inaction puts American worldwide companies at a competitive disadvantage and threatens our economic recovery.

“The Chamber believes now is the time for comprehensive, fundamental tax reform that lowers the individual and corporate rates and keeps them synchronized. Reform should also shift to a territorial tax system, bring taxpayers certainty, simplify the tax code, and provide adequate transition rules to get our tax code from where it is now to where it should be.

“Ultimately, the marketplace, and not the tax system, should allocate capital and resources. We can’t allow our tax code to continue to punish American businesses and taxpayers. We need reform and we need it now if we are serious about driving economic growth, creating jobs, and enhancing American competitiveness.”

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.