Imposing more rules and regulations on money market mutual funds is unnecessary and threatens to wipe out a vital and safe source of business financing, according to experts at a February 8 event hosted by the U.S. Chamber’s Center for Capital Markets Competitiveness (CCMC).

Money market funds, which enable businesses to efficiently and affordably manage cash that can be invested and withdrawn on a daily basis, are under attack, said Sen. Pat Toomey (R-PA).

Toomey, who sits on the Senate Banking Committee, said he would not rule out proposing legislation to protect money market mutual funds from new rules proposed by the Securities and Exchange Commission (SEC). “They are threatening the very viability of the product,” Toomey said of the proposed SEC plan.

The SEC recently announced that it is completing a proposal to shore up the $2.7 trillion money-market fund and, in the coming weeks, will unveil its two-part plan. 

The first proposal would call for money funds to abandon their traditional $1 share price, adopting a so-called floating net-asset value. It’s not clear that this would reduce runs on money market funds or improve systemic risk, Toomey pointed out.

The second plan would require funds to build a capital cushion designed to absorb potential losses and hold back at least 5% percent of client redemptions for 30 days. Investors wanting to sell all their holdings at once would be able to get only about 95% of their money back immediately.

Both proposals, Toomey said, would change the fundamental nature of the product. “Whatever risks are inherent in money market funds, it’s not clear to me that they justify this regulatory regime heading our way,” Toomey said.

The proposed SEC rules—which are not part of the Dodd-Frank financial regulatory reform law and are not mandated, according to CCMC President and CEO David Hirschmann—are on top of new rules enacted by the SEC in 2010. Those rules, which were put in place to prevent future runs and government bailouts, included liquidity requirements, shorter maturity limits and enhanced disclosure mandates.

For businesses such as FMC Corporation, an agricultural and industrial chemical company, money market funds are the preferred way to manage fluctuations in cash and to ensure adequate cash flow when needed. FMC benefits from money market funds in two ways, according to FMC Vice President and Treasurer Tom Deas—as an investment tool to invest working capital and as a market for the short-term instruments they issue to finance short-term funding needs.

“Every day we look at what payments we have to our vendors and suppliers and we look at what’s coming in from our customers, and if we have a surplus of cash, it’s our duty to invest that safely for our shareholders.” Deas said. Without money markets, FMC would face a limited choice in investments and less funding.  

FMC and other companies like it would also face higher financing costs because they will be forced to seek financing from banks and other lenders with higher fees and interest rates, Deas said.

The Chamber's David Hirschmann was interviewed on CNBC’s Kudlow Report, where he warned against the potential consequences of SEC reform on money market funds.