Fidelity Investments released a "Update on Money Market Mutual Fund Regulatory Developments," yesterday, which says, "On May 29, 2013, the Securities and Exchange Commission (SEC) announced that the SEC Commissioners plan to vote on June 5, 2013, on whether to issue a proposal for further regulation of money market mutual funds. Should a majority of the five commissioners vote to issue a proposal, it is important to bear in mind that this will still be just a proposal and it will be many months, if not years, before new rules -- if any -- come into effect. There is not yet a formal proposal to change money market mutual fund regulation."
Fidelity writes, "Rule 2a-7 of the Investment Company Act of 1940, which has been in place for decades and which was significantly strengthened in 2010, continues to regulate how all U.S. money market mutual funds are managed. There is no change in money market mutual fund regulation at this time."
They explain, "Should the SEC Commissioners decide to make an initial regulatory proposal, a comment period -- typically lasting at least a few months -- will open, during which industry participants, investors and others are invited to provide regulators their perspective on the proposed reforms. During the comment period, the existing rules remain in place. After the comment period ends, regulators generally spend several more months reviewing comments received and refining any proposed regulation. At the end of the review period, a final rule may or may not be voted upon by the SEC commissioners. To be approved, the rule would need a majority of the Commissioners' votes. Should the vote result in the adoption of the regulation, it is typically some extended period of time before new rules become effective."
Fidelity adds, "In the wake of market events in 2008, the SEC introduced reforms in early 2010 designed to make money market mutual funds more resilient to major market disruptions and to reduce their susceptibility to large and sudden shareholder redemptions. By setting further specific limits on money market mutual fund holdings, including establishing minimum levels of liquidity, reducing the average maturity of the funds' holdings, and further improving their overall credit quality, the SEC 2010 changes, which Fidelity supported, have made money market mutual funds less sensitive to both market events and shareholder activity.
Finally, they state, "We have provided the SEC with additional analysis and feedback that may prove helpful in their decision making. Fidelity believes that a consensus has emerged across the various constituencies that have been actively involved in this debate -- including, most importantly, the regulators. The consensus recognizes that market data shows how Treasury, government, municipal and retail general purpose/prime money market mutual funds have not demonstrated any need for further reform."
Fidelity ultimately shares the same goal as regulators and policymakers: to ensure the strength and stability of money market mutual funds and our financial system, while preserving the benefits that these funds provide investors, issuers and our economy. We will continue to advocate on behalf of all of our money market mutual fund shareholders and work with all policymakers as these important regulatory discussions continue.
We can state unequivocally that Fidelity’s money market mutual funds and accounts continue to provide security and safety for our customers’ cash investments. Our funds invest in money market securities of high quality, and our customers have full access to their investments anytime they wish. Most importantly, we continue to be vigilant in keeping our money market mutual funds safe and in protecting the $1.00 net asset value (NAV), which has always been our #1 objective in managing these funds."
