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DST on Operational Issues Connected with Potential Money Market Fund Reforms

DST Systems, Inc., which provides shareholder recordkeeping for the mutual fund industry, recently wrote a letter to the SEC discussing the operational issues that would accompany any decision to impose redemption restrictions for money market funds.  DST's letter warns the Commission that the potential redemption restriction options currently being discussed would have impacts that "could cripple if not destroy money market funds as a shareholder convenience."

With regard to the potential reform involving holding back a percentage of a redemption requested by a shareholder, the DST letter notes, "The systems and operational implications of this reform are pervasive and would be expensive for questionable benefit, and would likely be destructive to the money market fund product. "  As to the alternative approach of establishing a minimum balance requirement for shareholders in money market funds, the letter discusses the "pervasive and expensive systems and operational changes" that would be necessary, noting as well that the concept effectively would render sweep accounts impossible.

The letter can be found on the SEC's website, at http://www.sec.gov/comments/4-619/4619-128.pdf