Reed Smith's Stephen Keen writes on "Money Market Fund Reform: The Next Crossroads". He says, "The period for comments on the Securities and Exchange Commission's proposed money market fund reforms ended September 17. The tone of the comment letters, as well as the large quantity of responses, should serve to remind the SEC that the views of investors matter most in the rulemaking process. Indeed, the outcome of this regulatory chapter needs to be about which reform best serves the shareholders of money market funds, and not which best pleases the Financial Stability Oversight Council ("FSOC"). Unfortunately, sometimes it seems as if the latter, not the former, is the party getting preferential treatment. The SEC proposed two fundamentally different alternatives. Alternative 1 would force the prices of institutional prime and tax-exempt money market shares to "float" by requiring these funds to calculated their net asset values ("NAVs") using market-based prices and rounding the result to the nearest basis point. (A basis point is the fourth decimal following a price of $1—a hundredth of a cent). Retail money market funds could avoid this by imposing a $1 million limit on each shareholder’s daily redemptions. Alternative 2 would require all prime and tax-exempt money market funds to impose a 2 percent fee on redemptions if, at the end of the previous business day, its weekly liquid assets were less than 15 percent of its total assets. The fund's board of directors would have the option of suspending redemptions for up to 30 days, imposing a lower redemption fee or calling off the redemption fee entirely. As of October 9, 200 comment letters were available on the SEC's website regarding the proposal, in addition to more than 1,200 form letters against Alternative 1. Additional letters will continue to trickle in, but the current docket already reflects a massive and predominantly negative response to the proposed alternatives. Contrary to earlier reports, JPMorgan did not support Alternative 1, arguing instead that a variation of Alternative 2 is "the best option for achieving the SEC's objectives." Goldman Sachs' support for Alternative 1 was tepid, insofar as it recommended rounding the NAV to only the nearest 10 basis points, which would not produce a floating price under most market conditions. Of the 10 largest money market fund managers, only the two predominantly retail managers (Schwab and Vanguard) commented in favor of Alternative 1, in each case subject to increasing the cap on daily redemptions and solving the tax and accounting issues inherent in using a floating share price for daily cash management. Even before the comment period ended, unnamed sources at the Federal Reserve and the Treasury told the press that only Alternative 1 would be acceptable to FSOC."

Email This Article




Use a comma or a semicolon to separate

captcha image

Daily Link Archive

2024 2023 2022
April December December
March November November
February October October
January September September
August August
July July
June June
May May
April April
March March
February February
January January
2021 2020 2019
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2018 2017 2016
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2015 2014 2013
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2012 2011 2010
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2009 2008 2007
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2006
December
November
October
September