We learned from Stradley Ronon Stevens & Young LLP Counsel Joan Ohlbaum Swirsky that the Securities & Exchange Commission has issued a "no-action" letter on Straight-A Funding, an ABCP conduit set up by Citigroup and Morgan Stanley designed to package student loans under the Federal Family Education Loan Program. Swirsky says, "In the letter, the SEC staff states that money market funds may treat Student Loan Short Term Notes as Government securities for purposes of Rule 2a-7 diversification testing and for purposes of satisfying the 'names' rule for a government money market fund (which requires investment of at least 80% of assets in securities of the type suggested by the fund name). The Issuer Notes are backed by the Federal Financing Bank. The no-action letter eliminates uncertainty that would otherwise arise as to whether the obligation of the FFB qualifies the Issuer Notes as Government securities. By classifying the Issuer Notes as Government securities, the no-action relief eases diversification testing of the Issuer Notes by money market funds, and, in particular, may make the Issuer Notes a more appealing investment for a Government money market fund." In other news, see WSJ's "In Banks' Profit Push, 'Era of Low Fees Is Over'".
