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Federated Points Out Inconsistencies in FSOC MMF Proposal

Federated has asked the Financial Stability Oversight Council (FSOC) to fix inconsistencies in its money market fund proposal by reproposing the rule and restarting the sixty-day comment period.  Federated argues that the FSOC’s proposal concerning a floating NAV (Alternative One) is confusing and misleading:

“The current Proposal makes it impossible for the public to tell whether FSOC’s proposed recommendation would be ‘consistent with the requirements that apply to all other mutual funds,’ as represented in the [FSOC’s] Proposal, or whether FSOC is proposing to recommend that MMFs comply with a standard ten times more onerous than the standard for other mutual funds. . . . “[T]he current Proposal either (a) incorrectly describes the consequences of recommending that the SEC remove the current exemption provided by rule 2a-7 or, more likely, (b) incorrectly states the recommendation proposed as Alternative One. In either case, this error will confuse and mislead members of the public who may be affected by the recommendation and interested in commenting on Alternative One. Our greatest concern is that the Proposal misrepresents what FSOC intends to recommend. This might lead some users of MMFs who would be willing to accept fluctuations in a MMF’s share price “consistent with the requirements that apply to all other mutual funds,” but who would strongly object to the imposition of a higher standard, not to comment on Alternative One or even to comment in support of Alternative One because they do not understand its true import.”