In the staffs view, governmentagency means a government money market fund that has chosen to rely on the ability to impose a liquidity fee or gate pursuant to rule 2a7 c 2 iii, whereas exempt government means a government money market fund that has not chosen to do so. Prime mmf assets are largely claims on financials, primarily foreign banks. Many investors use money market funds to manage their cash and other short term funding needs. Post, the effect of sec amendments to rule 2a7 on the. Eu money market fund reform regulation finally published. Money market fund reform, investment company act release no. Securities and exchange commission, money market funds statistics, data. Money market fund reform and form ncr charles schwab. Since the credit crisis in 2008, regulators have been working hard to update laws. Securities and exchange commission voted 32 today to adopt significant changes to the regulation of money market funds in an effort to minimize the potential for a systemic run on money market funds like the one experienced in 2008. Regarding money market mutual fund reform november.
Sec adopts money market fund reform rules on february 23, 2010, the securities and exchange commission adopted amendments to rules 2a7 and 17a9 under the investment company act of 1940, which govern money market funds. Tax and accounting implications of floating nav money market funds. Money market fund reform sec open meeting july 23, 2014. On july 23, 2014, the securities and exchange commission sec adopted amendments to the rules that govern money market funds.
Commission sec under rule 2a7 of the investment company act of 1940. Jul 31, 2014 these amendments are intended to make structural and operational reforms to address the risk of investor runs in money market funds, while preserving the benefits of the funds. An evaluation of money market fund reform proposals. We assume that the main goal of mmf reform is safeguarding global financial stability. What you need to know subject in an effort to address concerns expressed by regulators that money market funds may contribute to financial instability, the securities and exchange commission recently adopted rules intended to change money market funds held by institutional inven96i. Viewpoint jun 2018 update us money market fund reform. The securities and exchange commission commission or sec is adopting amendments to certain rules that govern money market funds under the investment company act of 1940. Form ncr is the public reporting form that is to be used for current reports of money market funds required by section 30b of the act and rule 30b18 under the. Investor implications the next two years will be critical for money market funds as reform may bring behavior changes, liquidity obstacles in july 2014, the u. A municipal or muni fund is a money market fund that invests in municipal bonds, or munis.
As the primary regulator of mmfs, the sec is best placed to perform this analysis. Examination of money market fund regulation since the. Jun 25, 2019 according to the sec, the new regulations are designed to provide structural and operational reforms to address risks of investor runs in money market funds while preserving the benefits of the. Amortized cost and penny rounding for stable nav funds. Money market funds are managed with the goal of maintaining a highly stable asset value through liquid investments, while paying income to investors in the form of. We do not believe a roll back of the rules is advisable without first studying the effects of mmf reforms and the implications of any potential changes. Money market funds in the us are regulated by the securities and exchange commission sec under rule 2a7 of the investment company act of 1940. Eu money market fund reform regulation finally published almost four years after the european commission proposed new rules to regulate money market funds mmfs, the regulation on money market funds mmf regulation has been published, starting the clock ticking on the implementation timeline. Sec money market fund reform rules, effective in may 2010, outlined more conservative investment parameters related to credit quality, maturity and liquidity. Securities and exchange commission sec adopted a final rule on money market reform that will require a meaningful change to the way funds operate. Money market reform is a set of sec rule amendments meant to address any potential financial instability that could be caused by money market funds.
The 2014 sec reform of the money market fund mmf industry reduced the money likeness only of prime mmfs, by increasing the information sensitivity of their shares, and left government mmfs unaffected. Revised money market fund statistics data as of march. Proposed reforms first announced in june 20 during an sec open meeting, reforms would be comprised of two alternate though not mutually exclusive options, both of which are briefly explained below in table 1. A money market fund also called a money market mutual fund is an openended mutual fund that invests in shortterm debt securities such as us treasury bills and commercial paper.
The following is a further summary of the final and proposed rule amen. Sec regulations for money market mutual funds major changes noted in blue. A prime money market fund invests primarily in shortterm corporate debt securities but may also invest in other debt instruments, including u. Money market funds invest in high quality, shortterm debt securities and pay dividends that generally reflect shortterm interest rates. In addition to filing the form ncr with the sec, a mmf must also disclose this event on its website. Us money market fund reform overview wilmington trust.
The market failures associated with mmfs involve financial stability. In addition to the broad reforms to money market fund regulation discussed above, the sec today would repropose amendments to rule 2a7 and form nmfp to address provisions that reference credit ratings. The secs money fund proposals west legal webcast august 5, 20 presented by. Jul 23, 2014 the sec says that, when it adopted the 2010 amendments, it soon after recognized that the recent financial crisis raised additional questions of whether more fundamental changes to money market funds might be warranted see sec analyzes money market fund reform.
The amendments are designed to make money market funds more resilient to certain shortterm market risks, and to provide greater protections for investors in a money market fund that is unable to maintain a stable net asset value per share. In 2014, reforms for us money market funds mmfs were adopted to address problems that surfaced during the 2008 financial crisis 2008 crisis. The collapse in 2008 of the reserve primary fund, one of the most. The secs adoption of the amendments is the latest action taken by u. Implementation of either of two approaches to the secs proposed.
In january 2010, the sec adopted various amendments to money market fund regulations, which focused on raising the credit quality, increasing the liquidity, and reducing the maturity of money market fund portfolios. Certain considerations relating to the floating nav reform. Operational implications of floating nav money market funds. Fact sheet money market fund reform sec open meeting july 23. Money market fund reform on july 23, 2014, the securities and exchange commission sec voted to amend rule 2a7, of the investment company act of 1940. Fact sheet money market fund reform sec open meeting july 23, 2014 action the commission will consider whether to adopt final rules that reform the way money market funds are structured and operate in order to better equip them to address run risks, while preserving the benefits of money market funds.
An investment in a money market fund is not insured or guaranteed by the federal deposit insurance corporation or any other government agency. Money market fund reform a summary of significant changes. The sec is looking to prevent another disaster similar to the 2008 financial meltdown, where there was an investor exodus out of money market mutual funds. Oct 18, 2018 six years later in 2014, the securities and exchange commission sec issued new rules for the management of money market funds to enhance the stability and resilience of all money market funds.
The sec would also propose an amendment to the issuer diversification provisions of rule 2a7. Sec adopts money market fund reform rules planadviser. Among the final reforms was a requirement that institutional prime and municipal mmfs convert to floating net asset value fnav funds from constant net asset value cnav. Secs long path to money market fund reform ends in.
An investment in a money market fund is not insured. How do the mfqs money market message formats align to the sec money market reform. Sec approves money market fund reform at an open meeting held on january 27, 2010, the securities and exchange commission sec approved both new rules and amendments to the existing rules under the investment company act of 1940, as amended the 1940 act, that govern money market funds the reforms. Sec has implemented a number of regulatory changes. The july 29, 2014 financial services alert included a brief overview of the secs recent adoption of amendments to the rules governing money market funds mmfs. Jul 23, 2014 money market fund reform sec open meeting july 23, 2014.
The securities and exchange commission commission or sec is proposing amendments to certain rules that govern money market funds under the investment company act. The broken buck stops here embracing sponsor support in money. Perry golkin professor of law, university of pennsylvania law school. All references to proposed rules relate to rules as proposed in the proposing release. In this update, we answer frequently asked questions to help you navigate the changes. Even so, the sec continued to explore more fundamental reform of money market funds. Sec laying out specific measures for the sec to consider applying to the money market fund industry. March 2009 issues report containing recommendations for money market fund reform. A mmf is required to file a form ncr with the sec if it either suspends redemptions by imposing a redemption gate or resumes redemptions by removing a redemption gate. New rule changes impact money market funds in retirement plans money market funds mmfs are a popular and widely used capital preservation option within retirement plans, and it is important for plan fiduciaries to understand new legislation impacting these funds. The rules, rule amendments, and form are effective may 5, 2010.
Us money market reform overview summary of certain aspects of the reform amendments effective in 2016. The commission will consider whether to adopt final rules that reform the way money market funds are structured and operate in order to better equip them to address run risks, while preserving the benefits of money market funds. Establishes 3 categories of money market fundsretail, government, and institutional. Since then, the securities and exchange commission. In july 2014, the us securities and exchange commission sec amended the rules governing the us money market mutual fund industry. Sec adopts money market fund reform rules the network. Investors should consider the investment objectives. Nasdaq is committed to servicing the fund industrys price reporting needs. Background on money market funds a money market fund is a type of mutual fund that is required by law to invest in shortterm, lowrisk securities.
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