Note: Check back at 9am for breaking news from the start of Crane's Money Fund Symposium, which begins Wednesday at 1pm in Baltimore (and runs through Friday). We'll be releasing an "embargoed" news story then and we'll cover the keynote speech by ICI's Paul Stevens in tomorrow's News.... In today's News, law-firm Dechert LLP published a new "OnPoint legal update entitled, "SEC Proposes Sweeping Amendments to Rules Governing Money Market Funds." It says, "The U.S. Securities and Exchange Commission (SEC or Commission) on June 5, 2013 proposed for public comment sweeping amendments to Rule 2a-7 under the Investment Company Act of 1940 and other rules relating to money market funds (money funds). The Proposal included two key alternatives -- (i) requiring "institutional" prime money funds to operate with a floating net asset value (NAV), rounded to the fourth decimal place (e.g., $1.0000) (Alternative 1) or (ii) requiring money funds (other than government money funds) to impose a 2% liquidity fee during times of stress and allowing them temporarily to suspend redemptions using "redemption gates" during such times (Alternative 2). At the meeting approving the Proposal for public comment, several Commissioners raised the possibility of combining the two Alternatives into a single proposal and the SEC asked for public comment on that approach in the Proposal."
Dechert explains, "In addition to the Alternatives, the SEC recommended reforms that would be adopted under either Alternative, including more stringent disclosure, diversification and stress testing requirements. The SEC also recommended amendments to Form PF to require investment advisers to private liquidity funds, which generally operate in a manner similar to registered money funds, to disclose the funds' portfolio holdings and certain other information. Finally, the SEC proposed a number of amendments to clarify certain provisions of Rule 2a-7."
They add, "The Proposal begins a new phase in the ongoing debate over the regulation of money funds that has loomed over the investment management industry since the 2008 financial crisis. This DechertOnPoint provides background on the events leading up to the Proposal and discusses each of the proposed reforms in the Proposal.... The SEC is proposing a compliance period of two years for Alternative 1, one year for Alternative 2 and nine months for the other proposed amendments that are not specifically related to either Alternative."
The Dechert piece says in Conclusion, "Overall, the Proposal sets forth sweeping potential changes to money fund regulation. While representing a more balanced and tailored approach to reform than the approaches advocated in the Staff Proposals, FSOC Recommendations and PWG Report, the Proposal nevertheless would have a tremendous impact on the money fund industry and, potentially, on the markets in which money funds invest. Comments on the Proposal are due 90 days after its publication in the Federal Register."
Finally, note that Dechert's Jack Murphy will speak Friday at Money Fund Symposium. He joins Federated's John McGonigle and the SEC's Sarah ten Siethoff on a panel entitled, "Regulatory Roundtable: Pending and Potential.
