Moody's Investors Service recently published, "U.S. Money Funds' Risks are Reduced, But Susceptibility to Liquidity Risk Remains," which says, "Following-up on its proposed amendments to Rule 2a-7 of the Investment Company Act of 1940, the Securities and Exchange Commission this week adopted rule changes that are scheduled to go into effect within 60 days following their publication in the Federal Register. Taken as a whole, the amendments serve to further strengthen the credit quality, interest rate robustness, liquidity, and operations of money market funds and reduce their overall risk profile. However, there are several unresolved fundamental concerns about their susceptibility to runs and systemic liquidity risk that are yet to be addressed by the SEC, which is working in concert with the President's Working Group.... In our view, this [liquidity] requirement represents an important advance in the mitigation of liquidity risk. However, as also recognized by the SEC, the new liquidity buffers do not entirely eliminate susceptibility to runs. Institutional investors, which account for 67.4% of total net assets, might now be even more likely to preemptively redeem shares in response to a credit or other event that could lead to a loss of principal.... Notwithstanding these changes, regulatory uncertainty remains and is likely to persist until the SEC completes its exploration of possible additional reforms. Such reforms may include a floating net asset value, a private liquidity facility, mandatory redemptions in kind and real time disclosure of shadow NAVs."

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