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SEC Publishes Money Market Reform Proposals

On June 30, the SEC published the full text of money market reforms the Commission voted to propose for public comment at it's June 24, 2009 open meeting. As we described in our June 24 News Feed post, "SEC Proposes Money Market Reform Options," the proposals are intended to tighten restrictions on money funds and are aimed at increasing their stability and preventing the kind of sudden vulnerability they suffered last fall due to liquidity problems and market events. This release includes proposed regulatory amendments that, if adopted, would tighten the risk limiting parts of Rule 2a-7, including credit quality, maturity, and liquidity, increase the transparency of money market funds to both the Commission and investors, and lessen the effect when a particular fund breaks the buck and decides to liquidate. The release also requests industry comment on several concepts of potential future regulation of money market funds:

  • Whether stable net asset value should be abandoned in favor of a floating rate;
  • Whether funds should be permitted to make redemptions in kind to institutional shareholders;
  • The appropriate role of credit rating agencies. The questions with respect to credit rating agencies would include the possibility that boards would designate certain credit rating agencies (which would be routinely reevaluated) that the fund could rely on to make purchased decisions and use to monitor securities after purchase. The designation would be based on the NRSROs performance, accuracy etc; and
  • How the rules may better address the risks of investing in SIVs and other asset backed securities.

Comments on the rule proposals and the concepts on future regulatory changes are due by September 8, 2009.

The full text of the Commission's recent money market rule proposals is available at: http://www.sec.gov/rules/proposed/2009/ic-28807.pdf

Comments submitted on this proposal are available at: http://www.sec.gov/comments/s7-11-09/s71109.shtml

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