Market Upheaval Puts Money Market Funds in Spotlight

Money funds have been a major focus as the federal government and regulatory agencies continue to intervene in the troubled markets. Fund directors of money funds are most likely receiving frequent management updates on increased flows, falling yields and the effect of lowered interest rates on their funds. Boards can also expect more conversations on fee and expense waivers on money funds as the market uncertainty continues. Meanwhile, the SEC granted temporary no-action relief to the Investment Company Institute’s request regarding  purchases of fund securities among affiliates of money market funds.  The ICI noted that the relief was necessary because of the significant securities market disruptions caused by outbreaks of the coronavirus disease. The request targets a 1940 Act rule that aims “to enable advisers to address acute credit or liquidity problems in a money market fund portfolio by purchasing securities from the fund that would be difficult or impossible to sell on the open market at or near their amortized cost.” The ICI wrote that affiliated persons (or affiliated persons of such persons) of funds may wish to purchase securities from funds to enhance the funds’ liquidity or stability but are unable to do so in reliance on Rule 17a-9 of the 1940 Act because of conflicting banking regulations. The SEC granted the temporary relief based on a number of conditions, including filing and pricing provisions.  Meanwhile, a report in the Wall Street Journal explores the challenges facing money funds and quotes experts who question the need for further federal intervention considering the significant regulatory reforms enacted after the 2008 financial crisis.