The Association of Financial Professionals, which represents corporate treasurers, recently posted an article entitled, "AFP Joins Coalition Opposing a Floating NAV for Money Market Funds. The piece says, "AFP is joining a broad-based corporate effort to protect the ability of money market funds to operate with a stable $1.00 net asset value (NAV). In a forthcoming comment letter to the Securities and Exchange Commission (SEC), AFP will repeat its opposition to proposals that could undermine the usefulness of money market funds by requiring them to use a floating NAV."
"American business will lose one its most important sources of short-term funding if money market funds are forced to abandon their stable per-share value," reads the letter. AFP says, "The comment letter will be signed by AFP along with the U.S. Chamber of Commerce, Financial Executives International (FEI), and the National Association of Corporate Treasurers. All four groups are encouraging their members to join in this effort by signing the letter as individual companies."
The piece continues, "The letter will be filed in response to the SEC's request for comments on an October report, The President's Working Group Report on Money Market Reform Options. The President's Working Group (PWG) report suggests that money market mutual funds are susceptible to runs, which could contribute to systemic risks to the financial system. It then weighs the pros and cons of seven possible rule changes that the SEC could adopt. Three of those changes would require money market funds to use a floating NAV."
It explains, "Corporate finance professionals depend on money market funds as key instruments for cash management and short-term investing. The stable $1.00 NAV provides key accounting and tax benefits for cash managers, and is required by many companies' treasury policies. Forcing these funds to adopt a floating NAV would gravely harm their usefulness and drive away investors. Shrinking money market funds would harm corporate financing in turn, as these funds purchase approximately one-third of corporate commercial paper."
AFP also says, "Given the financial upheaval that such changes would likely create, the notion of floating NAVs has been widely opposed. In July, AFP and other key corporate finance organizations registered their opposition to these changes in a joint letter sent to Treasury Secretary Timothy F. Geithner and SEC Chairman Mary L. Schapiro. Now, corporate finance professionals must speak out again in the SEC's process."
Finally, the article adds, "Businesses are not alone in this effort. Investors, public utilities, state and local governments, and consumer groups have all urged regulators to preserve stable NAV money market funds. The SEC's deadline for public comments on the PWG report is January 10, 2011. If your company would like to sign onto a joint letter with the other companies as the signatories, please contact AFP's Director of Government Relations & Public Policy Jeanine Arnett at jarnett@AFPonline.org to have your company's name added to the list. AFP will also be submitting official comments outlining our specific positions on the report before the January deadline."
