Crane Data Subscribers
"SEC Conducts Sweep Inspection of Money-Mkt Funds" Says BoardIQ. BoardIQ.com, a Money Media publication geared towards fund boards of directors, wrote yesterday on recent SEC sweep inspections of money market mutual funds. Unsurprisingly, fund managers, lawyers, and this article say regulators are interested in illiquidity determinations (money funds may only hold 10% in their illiquid "basket"), shadow pricing (money funds don't use "mark-to-market" but must price occassionally to assure that the market price doesn't deviate materially from its "amortized cost" pricing), and the "implied guarantee" of advisors consistently backing their funds (have boards and investors come to expect advisor bailouts?). While an autopsy is undoubtedly warranted following the Great ABCP Squeeze of 2007, we should perhaps make sure the beast is dead first. Following debate, Crane Data doesn't expect any significant modifications to Rule 2a-7. Money market fund regulations worked like a charm during the current crisis, bending but not breaking. The market has already removed the risk that a liquidity drought in structured investment vehicles (SIVs) and extedible asset-backed commercial paper posed to fund valuations. We're aware of just one fund company that's been contacted regarding an SEC sweep focusing on money funds to date, but we're interested in learning more.
