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Fidelity Research on 2010 Money Fund Reforms

Recently Fidelity Investments provided the SEC with research analyzing the impact of the 2010 amendments to Rule 2a-7 on money market mutual funds.  The 2010 amendments imposed more stringent constraints on portfolio liquidity, maturity and quality, and also imposed new requirements relating to disclosure, operations, and board oversight.  Fidelity's research demonstrated that money market funds "now hold investment portfolios with lower risk and greater transparency, characteristics that reduce the incentive of shareholders to redeem."  Fidelity urged the SEC to consider carefully any unintended consequences of fundamental changes to money fund regulations.  The letter noted:

"In particular, we continue to believe that proposals such as floating the NAV, imposing onerous capital requirements or adding burdensome redemption restrictions will ultimately destroy the money market fund industry."

The Fidelity research is here.