The Securities & Exchange Commission posted a document entitled, "2014 Money Market Fund Reform Frequently Asked Questions," we learned from Joan Swirsky of Stradley Ronon. The SEC also posted a "Valuation Guidance Frequently Asked Questions." The FAQ explains, "The staff of the Division of Investment Management has prepared the following responses to questions related to the money market fund reforms adopted in July 2014 and expects to update this document from time to time to include responses to additional questions. Any updates will include appropriate references to dates of new or modified questions and answers. These responses represent the views of the staff of the Division of Investment Management. They are not a rule, regulation, or statement of the Commission, and the Commission has neither approved nor disapproved these FAQs or the interpretive answers to these FAQs. The 2014 money market fund reform Adopting Release is available at: http://www.sec.gov/rules/final/2014/33-9616.pdf." The 53 questions represent mostly minor technical and legal issues, and the only interesting sections (according to Crane Data) appear to be those addressing 60 day maturity funds (saying they can't say they seek to maintain a stable NAV) and FDIC insured deposits (saying these are not "government securities").

The FAQ includes: one question on Form N-MFP," two questions on "Form N-CR," and three questions on "Form N-1A." Regarding "Website Disclosure," one of the two questions says, "7. Q. Is a tax-exempt fund required to calculate and disclose daily liquid assets percentages on the fund’s website each day? A. No. Under rule 2a-7(d)(4)(ii), tax-exempt money market funds are not required to maintain daily liquid assets. Therefore, notwithstanding the requirement that money market funds disclose the percentage of daily liquid assets on its website pursuant to rule 2a-7(h)(10)(ii)(A), in the staff's view, a tax-exempt money market fund may omit such disclosure."

Regarding "Funds that Invest only in Securities that Mature in 60 Days or Less," the SEC staff writes, "9. Q. Can a money market fund that is subject to a floating NAV state in its advertising, sales literature or prospectus that it will seek to maintain a stable NAV by limiting its portfolio securities to only those securities with a remaining maturity of 60 days or less and valuing those securities using amortized cost? A. No. The staff believes that a floating NAV money market fund may not state in its advertising, sales literature, or prospectus that it will seek to maintain a stable NAV by limiting its portfolio securities to only those securities with a remaining maturity of 60 days or less and valuing those securities using amortized cost, as such a statement would be misleading to investors. The staff expects that there will be market circumstances that may require a floating NAV money market fund's share price to fluctuate, regardless of how it limits its investment duration or its use of amortized cost for certain portfolio securities. For example, if a MMF is holding a security that experiences credit deterioration, that security's amortized cost may not be approximately the same as fair market value, even where the remaining maturity of that security is 60 days or less. Accordingly, as discussed in the Adopting Release, all floating NAV money market funds must state in their advertisements, sales materials, and prospectus, that the funds' share price will fluctuate. However, if a floating NAV money market fund states that it will seek to maintain a stable NAV, the staff is concerned that such potential contradictions could be confusing or misleading to investors."

It explains, "A floating NAV money market fund may use amortized cost to value individual portfolio securities under certain circumstances pursuant to the guidance the Commission has provided in the Adopting Release and previously. However, as discussed in question 8 above, if a disparity were to arise between the amortized price of a security that matures in 60 days or less and the fair value of such a security that was large enough that it would affect the fund's NAV, then the staff believes that the use of amortized cost in that situation would not be compatible with the guidance provided in the Adopting Release as the amortized cost value of the portfolio security would not be "approximately the same" as the fair value of the security determined without the use of amortized cost valuation. Associated issues are also discussed in question 8 above and in the FAQs provided on the valuation guidance."

On "Amortized Cost Guidance," the SEC's FAQ tells us, "10. Q. Is the guidance on the use of amortized cost valuation for securities with a remaining maturity of 60 days or less contained in the Adopting Release applicable to stable value government or retail money market funds? A. The guidance on the amortized cost method contained in the Adopting Release applies to funds' use of the amortized cost valuation method for certain individual securities. Under rule 2a-7, stable value money market funds may value their entire portfolio using the amortized cost method of valuation, and accordingly in the staff's view, the guidance would generally not be relevant to those funds operations. Additionally, as noted in footnote 873 of the Adopting Release, under rule 2a-7(h)(10)(iii), stable value money market funds may not use the amortized cost method for individual securities or for their portfolio when they shadow price their shares."

They write on "Compliance Dates," "11. Q. Do the compliance dates for revised Form N-MFP occur in two stages -- e.g., report shareholder flows by April 14, 2016 but report NAV per shares to the fourth decimal place by October 14, 2016? A. The compliance date for amendments to all questions in revised Form N-MFP is April 14, 2016. However, for those funds that have not determined whether they are retail or institutional before April 14, 2016, the fields in Form N-MFP that pertain to NAV reporting may be marked as not applicable prior to October 16, 2014.... 13. Q. The compliance date for stress testing and certain other amendments is April 14, 2016; however, at least some of the amendments are not effective on that date if "specifically related to either floating NAV or liquidity fees and gates." Since certain of the changes to stress testing modify the tests so they are appropriate to floating NAV money market funds, is the compliance date for stress testing amendments October 14, 2016? A. The compliance date for the amended stress testing requirements is April 14, 2016. However, for any stress testing requirements that are specifically related to a floating NAV fund (such as the requirement to test principal volatility) the compliance date is October 14, 2016, although a fund may comply earlier. 14. Q. What is the compliance date for the new definition of government money market fund? A. The compliance date for the amendments related to the fundamental reforms (floating NAV and liquidity fees and gates, which includes the definitions of government money market fund) is October 14, 2016. Accordingly, a fund must meet the new definition of government money market fund by October 14, 2016 in order to use amortized cost or the penny rounding method thereafter, although the fund may begin to comply earlier."

The SEC also answers six questions on "Retail Money Market Funds," three questions on "Insurance Separate Accounts," five questions on "Fees and Gates," one question on "Treasury Money Market Funds," and six questions on "Government Money Market Funds." One interesting response among this last group is: "34. Q. Are bank certificates of deposit, which are insured up to the $250,000 FDIC insurance limit, "government securities" for purposes of the definition of a government money market fund? A. The staff has previously declined to provide no-action assurance that FDIC-insured bank certificates of deposit are "government securities" within the meaning of Section 2(a)(16) of the Act for purposes of determining whether an entity is an investment company under the Act. See Western International Insurance Company (pub. avail. July 24, 1985). The staff has not altered or rescinded this no-action position. The staff similarly does not view FDIC-insured bank certificates of deposit as "government securities" for purposes of the definition of a government money market fund."

The 16-page FAQ also addresses issues involving: "Transition and Reorganizations," "Registration Fee Credits," "Cash Items for Purposes of "Investment Company" Definition," "Diversification," "Performance Record," "Rule 2a-7 References," "Asset-Backed Securities," "Rule 22e-3," and "Maturity."

Finally, the SEC's accompanying 2-page "Valuation Guidance Frequently Asked Questions" says, "The staff of the Division of Investment Management has prepared the following responses to questions related to the valuation guidance for all mutual funds provided in the release adopting money market fund reforms in July 2014, and expects to update this document from time to time to include responses to additional questions. Any updates will include appropriate references to dates of new or modified questions and answers. These responses represent the views of the staff of the Division of Investment Management. They are not a rule, regulation, or statement of the Commission, and the Commission has neither approved nor disapproved these FAQs or the interpretive answers to these FAQs. The 2014 money market fund reform adopting release ("adopting release") is available at: http://www.sec.gov/rules/final/2014/33-9616.pdf and the valuation discussion begins at page 47812 of the release."

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