Dreyfus' Cardona Backs NRSROs
Dreyfus' Charlie Cardona says in his comment letter on the SEC's recent NRSRO Proposal (see yesterday's News), "We believe the Proposals Provide a Framework for Higher Credit Risk in Money Market Funds. As we first commented in 2009, we believe that eliminating references to credit ratings in Rule 2a-7 is not in the best interests of money market funds and their shareholders, and is a curious result following a period of heightened concern for systemic risk. We believe the Proposals create more favorable conditions for increasing credit risk and "chasing yield," the latter of which should be of even greater concern over time when interest rates normalize and systemic passions naturally subside. We believe the Proposals Would Reduce Portfolio Holdings Transparency and Increase Client Servicing Requirements. We believe the Proposals would expand money fund sponsors' client servicing requirements. Eliminating credit ratings references would erase a significant amount of the inherent transparency associated with a money market fund investment (as provided by the risk-limiting conditions of Rule 2a-7) and would oblige fund sponsors to compensate for that loss. We Believe References to Credit Ratings in the Form N-MFP Can and Should be Retained. We respectfully request that the Commission reconsider whether Section 939A requires the Commission to propose removing references to credit ratings in the Form N-MFP. We believe that Section 939A does not require it, and we support retaining these references and disclosure items in the Form N-MFP (a) to help fulfill the expanded client servicing requirements discussed above; (b) to provide a critical tool for Commission and Staff oversight of money market fund credit quality; and (c) to perhaps even provide an industry "check" on potential yield chasing. We believe the proposed definitions of First Tier Security and Second Tier Security may not provide an equivalent standard of creditworthiness to that which currently is provided for under Rule 2a-7."
