ICI Annual Report and MMFs
The just-released Investment Company Institute's "2016 Annual Report" just briefly mentions money market mutual funds in a couple of places. An update from Marty Burns, ICI's Chief Industry Operations Officer, about "new regulations for money market funds, which came into effect in October," says, "This has been a huge, multiyear effort involving hundreds of people: member representatives on four working committees, staff from across the Institute in almost every discipline -- operations, research, legal, government affairs, communications -- and outside stakeholders, such as broker-dealers, service providers, and transfer agents. This reform is a fundamental change to how money markets are administered and processed. Very broad in scope, it forced changes to how shareholders can invest in money funds, the systems used to manage the business, and the interaction with business partners -- in essence, it affected every aspect of the money market industry. And our efforts have extended beyond October 14, the compliance date -- we're continuing to monitor the situation and look for areas where we can improve practices and find further efficiencies." The report also comments on, "Money Market Fund Reform Tax Issues: The Internal Revenue Service," explaining, "[The] (IRS) and the Treasury Department issued several important pieces of guidance regarding the tax implications of the SEC's money market fund rule for investors and funds. The guidance responds to several requests made by ICI. First, the IRS provided an alternative diversification requirement for variable insurance product funds that become government money market funds, alleviating concerns that such funds would not be able to satisfy existing tax requirements. Second, the IRS issued guidance addressing the tax treatment of adviser contributions made to money market funds in preparation for compliance with the new money market fund rule. Third, the IRS and Treasury finalized regulations on use of a simplified method of tax accounting, called the net asset value (NAV) method, by investors in floating NAV money market funds. The final regulations also include several other changes recommended by ICI, including extending the NAV method to investors in stable NAV funds that charge a liquidity fee and clarifying the use of the NAV method by regulated investment companies for excise tax purposes."
