Note: Asset outflows subsided following last week's tax payment-related drop. Money fund assets declined $35 billion last Tuesday and $20 billion last Wednesday, but fell just $4 billion on Thursday. Early indications are that outflows related to the expiration of the Treasury Guarantee Program were minimal Friday. (See Money Fund Intelligence Daily for our updated daily asset flow data.)

On Friday, the SEC issued the temporary rule "Disclosure of Certain Money Market Fund Portfolio Holdings", which takes over some NAV (net asset value) and portfolio holdings monitoring functions that had been mandated by the Treasury under its Temporary Guarantee Program for Money Market Funds. The "interim final temporary rule" says, "The Securities and Exchange Commission is adopting an interim final temporary rule under the Investment Company Act of 1940 to require a money market fund to report its portfolio holdings and valuation information to the Commission under certain circumstances."

The summary says, "The new reporting requirement is designed to provide information substantially similar to that submitted by certain money market funds under the Temporary Guarantee Program for Money Market Funds established by the Department of the Treasury, which will expire on September 18, 2009." The rule's effective date is September 18, 2009 through September 17, 2010, and comments should be received on or before October 26, 2009.

On Background, the release says, "Money market funds are open-end management investment companies that invest in short-term obligations and have a principal investment objective of maintaining a net asset value of $1.00 per share. Since October 2008, most money market funds have participated in the `Treasury Department's Temporary Guarantee Program for Money Market Funds.... Money market funds participating in the Guarantee Program have been required, in certain circumstances [if their market-based net asset value per share was below $.9975], to submit their portfolio schedules and related information each week to the Treasury Department and the Commission."

The SEC added, "In June 2009, the Commission proposed new rules and rule amendments to reform the regulation of money market funds. The proposal included a new rule and a new form N-MFP, on which money market funds would report to the Commission detailed information about their portfolio holdings, which we would use to monitor the funds. We proposed to require that all money market funds submit more detailed information than we currently receive under the Guarantee Program, and we proposed that the information be filed in a format that would permit us to create a searchable database of money market fund information. The proposed requirement that money market funds report detailed portfolio information to the Commission was designed to improve our ability to oversee those funds."

In other news, several articles speculated about the "Liquidity Exchange Bank," a private or public entity that could provide liquidity to money market funds. See Bloomberg's "Fidelity, Vanguard Said to Plan Emergency Bank for Money Market", Dow Jones' "Industry-Sponsored Money Fund Liquidity Pool Eyed", and Reuters' "Fidelity, Vanguard discuss money fund backstop: report". (See also, Crane Data's August 27 piece "Money Fund Reform: Third Way Proposed by Wells' Dave Sylvester".)

Email This Article

Use a comma or a semicolon to separate

captcha image