In a press release issued this morning, The Institutional Money Market Funds Association, or IMMFA, "announced changes to its Code of Practice, to come into force in January 2010." It says, "In light of the events over the last two years, the IMMFA Code has been revised to provide additional protection to investors in money market funds, through improved standards for maturity, credit quality, liquidity and disclosure."

The IMMFA Code of Practice is "a set of best practice standards for the management and operation of triple-A money market funds and compliance with the Code is mandatory for IMMFA members." The revised Code "will help compliment the requirements currently imposed by individual EU regulatory authorities" and includes new provisions which limit liquidity, interest rate, and credit risk, and impose additional disclosure obligations on funds."

The new Code includes: "A weighted average final maturity (WAFM) of not more than 120 days. Funds must respect the AAA-rating credit criteria established by the credit rating agencies.... [A] weighted average maturity (WAM) of not more than 60 days.... [A] minimum of 5% in overnight securities and 20% in securities maturing within one week. Funds must follow a Board-approved liquidity policy. Fund providers must manage shareholder concentration. Funds must disclose their WAM, WAFM, liquidity ladder and performance data monthly. Funds must make available the percentage held by the top ten shareholders upon request."

Chief Executive Gail Le Coz says, "The IMMFA Code of Practice is increasingly used as a benchmark by which money market funds are measured. The revisions are a proactive step by the industry to enhance the existing money market fund framework and will help ensure the resilience of money market funds, allowing them to continue to deliver against their objectives of capital security and liquidity."

She adds, "The revisions reflect the conclusions of a working group of industry experts, which has conducted detailed analysis of the appropriate risk limitations within a money market fund. This honest assessment highlighted a number of improvements which should be made, and we are satisfied that the revised Code of Practice will lead to more robust funds which provide additional benefits to investors, markets and fund management companies."

The release adds, "Money market funds are a vital cash management tool for institutional investors across Europe. Investors appreciate the diversification, same-liquidity and segregation of assets offered by these funds. By virtue of their investment in high quality, short-term money market securities, these funds also help provide businesses with access to lower cost financing and contribute liquidity to the European money markets.... IMMFA is the trade association for providers of triple-A rated money market funds, and covers nearly all of the major providers of this type of fund outside the US. Funds under management exceed E425 billion as at November 2009."

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