Dreyfus Recaps 2a-7 Changes for AFP
BNY Mellon posted a contact page for this weekend's AFP Conference in San Diego, which includes a news piece from Dreyfus on "Navigating Money Market Fund Reform." It explains, "Given our commitment to engage and proactively communicate with our clients on an ongoing basis, we are sharing an update on money market fund (MMF) reform with developments as of October 2, 2023. To recap, the US Securities and Exchange Commission (SEC) approved long-anticipated MMF reform on July 12, 2023. This reform, which we refer to here as MMF amendments, modifies certain rules that govern MMFs under the Investment Company Act of 1940, as amended (1940 Act), and is designed to improve the resiliency, liquidity and transparency of money market funds, thereby benefiting underlying investors. We support the MMF amendments." The brief tells us, "Dreyfus is part of a comprehensive, multi-workstream working group which involves all areas of BNY Mellon that support the money market fund industry. Please see the following timeline and status updates from the Dreyfus team." Dreyfus explains, "Effective October 2, 2023" is the "Removal of redemption gates" and "Removal of tie between liquidity fees and thresholds." The Status is: "MMFs Implemented. No operational challenges to report." Discussing the "Reverse distribution mechanism; (RDM) permitted when gross yields are negative," they write for "Retail & Government MMFs" "Although RDM is now permitted, we continue to work with clients and operational partners on processing and refining workflows. Additionally, we, and the industry, are patiently waiting for the Internal Revenue Service (IRS) to advise on tax treatment implications if RDM is utilized. Stay tuned -- there will be more to come on the RDM front." The piece also tells us, "Effective April 2, 2024" is the "Discretionary liquidity fee [for] Non-government MMFs." "Discretionary fees are not new to MMFs; however, we are establishing a framework around this particular amendment internally. No operational challenges to report." Also, they mention, "Increased portfolio liquidity requirements" for all MMFs and say, "No operational challenges to report. We are prepared to manage portfolios with these higher liquidity percentages: At least 25% of the fund's total assets in daily liquid assets (increase from 10%), [and] At least 50% of the fund's total assets in weekly liquid assets (increase from 30%)." On the "Calculation of weighted average maturity (WAM)/weighted average life (WAL), they post, "We agree with the SEC's determination that standardized calculations for WAM and WAL should be based on the market value of securities. We are prepared to make these changes where necessary. No operational challenges to report." The update states that, "Effective June 11, 2024," regarding changes to "Forms N-MFP and N-CR," "We are in the process of working through these MMF amendments internally. No challenges to report." Finally, they say about the rules "Effective October 2, 2024," which include the "Mandatory liquidity fee for Institutional Prime and Tax-Exempt Funds," "We are evaluating client needs and expectations, including how to best support the imposition of a mandatory liquidity fee from an operational and timing standpoint. If you have any views on this topic, please connect with us through your Dreyfus sales representative." The piece adds, "While expected, the SEC's money market fund reform is a significant regulatory change. We strongly believe Dreyfus is well positioned to continue to be a trusted partner by delivering high-quality cash management investment solutions in the space."
