Below, we excerpt from what we consider the 10 most important stories from Crane Data's News archives for 2009. While ultra-low yields and fee waivers, mergers and consolidation, and of course massive asset outflows were major issues for money funds this past year, the list is dominated by regulatory proposals and discussion. We list the first five major stories of the year below by date. We'll continue with the remaining five in tomorrow's Crane Data News.
Jan. 19, 2009. Group of Thirty Recommendation Poses Threat to Money Market Funds. The Group of Thirty, a "private, nonprofit, international body composed of very senior representatives of the private and public sectors and academia" recently issued a publication entitled, "Financial Reform, a Framework for Financial Stability," which contains suggestions that, if implemented, would change money market funds dramatically and could threaten the very existence of the money fund business.
March 18, 2009. ICI MM Working Group Ships Report: WAM, Liquidity Changes in Store. The Investment Company Institute said today that its "Board of Governors has received a report from the Money Market Working Group and has unanimously endorsed the Group's recommendations concerning new regulatory and oversight standards for money market funds." No major changes were proposed, and, unsurprisingly, the report opposes floating NAVs, insurance and capital reserves for money funds. Suggestions of note include adding a 5% 1-day and 20% 7-day liquidity mandate, reducing the WAM maximum from 90 to 75 days, adding monthly client concentration and portfolio holding disclosures, eliminating investment in 'Second Tier' securities, and implementing stess-testing of portfolios.
April 1, 2009. Treasury Extends Money Fund Guarantee Program Until Sept. 18, 2009. Yesterday, the U.S. Treasury Department "announced an extension of its temporary Money Market Funds Guarantee Program through September 18, 2009, in order to support ongoing stability in financial markets." The Program, originally launched on Sept. 19, 2008, had been scheduled to end on April 30, 2009. Most funds will continue to pay 1.5 basis points for coverage and will have until April 13 to reapply. We expect a number of Treasury and government funds to drop coverage, but we expect prime and tax-exempt funds to virtually all reenlist.
June 18, 2009. Treasury's 'Financial Regulatory Reform: A New Foundation' on MMFs. Yesterday, the Obama Administration and Department of the Treasury unveiled a white paper entitled, "Financial Regulatory Reform: A New Foundation," which spends less than two of its 89 pages discussing money market funds. It says under the section, "Reduce the Susceptibility of Money Market Mutual Funds (MMFs) to Runs," "The SEC should move forward with its plans to strengthen the regulatory framework around MMFs to reduce the credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole less susceptible to runs."
July 1, 2009. SEC Releases 197-Page Text of Proposed Money Market Fund Reform. The SEC has released the full text of its proposed "Money Market Fund Reforms". The 197-page document's summary says, "The Securities and Exchange Commission is proposing amendments to certain rules that govern money market funds under the Investment Company Act. The amendments would: (i) tighten the risk-limiting conditions of rule 2a-7 by, among other things, requiring funds to maintain a portion of their portfolios in instruments that can be readily converted to cash, reducing the weighted average maturity of portfolio holdings, and limiting funds to investing in the highest quality portfolio securities.... In addition, the Commission is seeking comment on other potential changes in our regulation of money market funds, including whether money market funds should, like other types of mutual funds, effect shareholder transactions at the market-based net asset value, i.e., whether they should have 'floating' rather than stabilized net asset values."
