Stradley's Swirsky on FSOC
Stradley Ronon Counsel Joan Ohlbaum Swirsky penned a recent "Fund Alert" entitled, "FSOC Proposes Fundamental Reform Recommendations for Money Market Funds." It says, "At an open meeting (Open Meeting) on Nov. 13, the Financial Stability Oversight Council (FSOC) voted unanimously to release for public comment proposed recommendations (Proposed Recommendations) to the SEC for the fundamental reform of money market funds. In significant respects, the Proposed Recommendations mirror reform ideas that have circulated since the 2008 financial crisis and that have suffered attack in many quarters of the fund industry. FSOC proposes that money market funds be required to implement one of the reforms below. 1. Adopt a floating net asset value (NAV). 2. Comply with new requirements to both: maintain a capital buffer of up to 1 percent of fund assets; and require that 3 percent of each shareholder's highest account value in excess of $100,000 during the previous 30 days (the "minimum balance at risk" or MBR) be made available for redemption on a delayed basis.... [or] 3. Maintain a capital buffer of up to 3 percent of fund assets and possibly comply with other measures that might allow the fund to reduce the required size of the buffer. Other measures might include more stringent requirements as to portfolio diversification or portfolio liquidity, "know your customer" measures, and/or disclosure enhancements. Detail on each of these proposals is available at the link at the bottom of this article. The following portion of the Fund Alert seeks to provide regulatory context for the Proposed Recommendations and show how they fit in the swirl of regulatory activity surrounding money market funds. The Proposed Recommendations state that the three approaches may be alternatives, and a fund sponsor might manage money market funds that follow different approaches. Comments are due on the Proposed Recommendations by Jan. 18, 2013."
