Summary of Money Market Fund Regulatory Proposals
DESCRIPTION OF NEW OR
AMENDED RULE PROPOSAL
* Suspends redemptions upon breaking
the buck to permit liquidation in an
orderly manner.
* Permits SEC to rescind or modify the
relief provided by the rule.
Redefines “eligible securities” to include
securities with only the highest (rather
than the two highest) short-term debt
rating from the requisite NRSROs.
CHANGE FROM
CURRENT RULE
Replaces temporary rule 22e-3T,
which provides a similar
exemption for funds participating
in the Treasury Guarantee
Program.
Deletes the terms “first tier” and
“second tier” and specific second
tier security provisions.
Long-Term Unrated Securities
Amended Rule:
2a-7(a)(11)(iv)(A)
Permits money funds to acquire such
securities only if they have long-term
ratings in one of the two highest
categories.
Security may be eligible if it has a
long-term rating in one of the
three highest categories, although
the security may be eligible if it
has received a long-term rating in
one of the three highest long-term
rating categories and is of
comparable quality to a rated
security.
Credit Reassessment
Amended Rule:
2a-7(c)(7)(i)(A)
A board must reassess a security’s credit
risk only if, subsequent to its acquisition,
the adviser becomes aware that an
unrated security has received a short-term
rating below the highest category.
Currently, a board must reassess
if, subsequent to acquisition:
(i) the security is no longer a first
tier security, or (ii) the adviser
becomes aware that an unrated or
second tier security has received a
short-term rating below the
second highest category.
Maturity
New and Amended Rule:
2a-7(c)(2)(ii)
2a-7(c)(2)(iii)
2a-7(d)(1)
Imposes a 60-day weighted average
maturity limit.
Currently imposes a 90-day
average maturity limit.
Limits the weighted average life of
portfolio securities to 120 days.
* Deletes provision permitting a fund to
acquire Government securities with
remaining maturities of up to 762
days.
* Interest rates on variable-rate
Government securities must be
readjusted no less frequently than
every 397 days.
No similar provision.
Liquidity
New Rule: 2a-7(c)(5)
* Prohibits money funds from acquiring
securities unless they are liquid at time
acquired.
* Exempts tax exempt funds from the
minimum daily liquidity requirements.
No similar provision.
2a-7(c)(5)(iii)
Each taxable retail money fund must
invest at least 5% of its assets in cash,
U.S. Treasury securities, or securities that
can provide daily liquidity.
No similar provision.
PROPOSAL
Fund Liquidations
New Rule: 22e-3
Eligible Securities
Amended Rule: 2a-7(a)(11)(iii)
Currently, money funds may
acquire Government securities
with remaining maturities (or
interest re-set dates) of up to 762
days.
PROPOSAL
DESCRIPTION OF NEW OR
AMENDED RULE PROPOSAL
CHANGE FROM
CURRENT RULE
Limits taxable institutional fund to
acquiring daily liquid assets unless,
immediately after acquiring a security,
fund holds at least 10% of total assets in
daily liquid assets.
No similar provision.
Board must annually determine whether
fund is an institutional money fund.
No similar provision.
Minimum weekly liquidity requirement.
No similar provision.
Money fund must hold highly liquid
securities sufficient to meet reasonably
foreseeable redemptions and any
commitments made to shareholders.
No similar provision.
Stress Testing
New Rule: 2a-7(c)(8)(ii)(D)(1)
Money fund using amortized cost method
must adopt periodic stress testing
procedures.
No similar provision.
Repurchase Agreements
New and Amended Rule:
2a-7(a)(5)
Money funds would be able to adopt
“look-through” treatment only with
respect to repos collateralized by cash or
Government securities.
Currently, a fund may look
through repos collateralized with
cash, Government securities, and
first tier securities.
2a-7(c)(4)(ii)(A)
Board or its delegate must evaluate
counterparty creditworthiness, regardless
of whether repo is fully collateralized.
Consistent with SEC position in
ICI no action letter (June 15,
1999).
Public Holdings Disclosure
Amended Rule: 2a-7(c)(12)
Requires monthly holdings disclosure on
fund website.
Currently, funds must report
portfolio holdings quarterly.
Monthly Filing of Holding Reports
Amended Rule: 30b1-6
Requires monthly SEC filing of detailed
holdings information on new Form MFP.
Currently, funds must report
portfolio holdings quarterly.
Quarterly Filing of Holding Reports
Amended Rule: 30b1-5
Exempts money funds from requirement
to file holdings on Form N-Q.
Form N-Q requires money funds
to file holdings.
Transaction Processing
Amended Rule: 2a-7(c)(1)
* Requires funds to have the operational
capacity to “break the buck” and
continue to process transactions in an
orderly manner.
* A board must annually determine in
good faith that the fund has capacity to
redeem and sell shares at prices based
on current NAV.
Once a fund has broken the buck,
the fund could no longer use the
amortized cost method of valuing
portfolio securities, and therefore
would have to compute share
price by reference to market
values.
Affiliated Transactions
Amended Rule: 17a-9
* Permits affiliate to buy a security that
has defaulted, even though the security
continues to be an eligible security.
* Permits affiliates to purchase portfolio
securities for cash at the greater of
amortized cost or market value,
provided the affiliate promptly remits
to the fund any profit realized from a
later sale.
Currently, an affiliate may only
purchase a security that is no
longer an eligible security.
2a-7(c)(5)(iii)
Liquidity
New Rule: 2a-7(c)(5)(v)
2a-7(c)(5)(iv)
2a-7(c)(5)(ii)