In this post from last fall, I wrote about the efforts under way by members of the business community to fight changes proposed by the SEC to the regulations governing money market funds. The changes would have restricted the funds from holding commercial paper from A2/P2 issuers, such as companies like Alcoa, Inc. and Marriott International, Inc. In a post several months before that, I wrote about changes proposed to the regulation of over-the-counter (OTC) derivatives proposed by the U.S. Department of the Treasury. That proposal would have required standardized OTC derivative transactions to take place on exchanges.

Both sets of proposals were intended to protect the country from another financial meltdown. In reality, they would have accomplished little in that regard, but would have made life even more difficult in corporate America today. The proposed changes to the regulation of money market funds would have made it tougher for issuers of A2/P2 commercial paper, including many major corporations, to find a market for their paper. And, the move to force all OTC derivatives to exchanges would have required more record-keeping and reporting. “The same paddy wagon that the [regulators] want to throw AIG in, they want to throw us in, too,” says Thomas Deas, Jr., executive vice president with the National Association of Corporate Treasurers. Deas also is vice president and treasurer with FMC Corporation, Philadelphia.

So, Deas and his colleagues at NACT, as well as members of other organizations, like the U.S. Chamber of Commerce, got busy. They’ve been sending letters and meeting with elected officials in Washington to make their case. The NACT, along with several hundred other companies and trade organizations, joined forces to form the Coalition for Derivatives End-Users. The group has sent letters to all members of the U.S. Senate, urging them to exempt business end-users of derivatives from any central clearing requirements.

It’s too early to claim success on that front, as the regulations governing OTC derivatives have yet to be finalized. However, the group may be making headway. H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, sponsored by Rep. Barney Frank, would require that all standardized swap transactions between dealers and major swap participants take place on an exchange or electronic platform. The bill defines a major swap participant as anyone who maintains a substantial net position in swaps, exclusive of hedging for commercial risk. Earlier proposals would have required all over-the-counter derivatives to be brought onto exchanges.

On the issue of money market funds’ ability to purchase A2/P2 commercial paper, the SEC did respond to the treasurers’ concerns, Deas says. Initially, the SEC was going to entirely cut off money market funds’ ability to purchase A2/P2 paper, Deas says. Instead, the new rules adopted by the SEC, announced on January 27, allow the funds to continue to purchase the paper, albeit with greater restrictions. For instance, the funds can have no more than 3 percent of their assets in A2/P2 commercial paper; the previous limit was 5 percent. Similarly, the funds can have no more than .5 percent of their assets in A2/P2 paper from a single issuer; the current limit is the greater of 1 percent or $1 million. “We think that we can live with” these restrictions, Deas says.

Until these issues reared up, the NACT refrained from taking advocacy positions, concerned that with its broad range of membership, any position it took would alienate some in the group. But, on these two issues, its members were united. Now, they’re also gratified that the group’s efforts have met with some success, Deas says. “We felt like it made a difference.” ###