Stable NAV Bill Filed in House Again
Wisconsin Representative Gwen Moore (D-WI-4) recently filed H.R.4492, the "Consumer Financial Choice and Capital Markets Protection Act of 2019," the latest bill in the House of Representatives that attempts to restore the $1.00 NAV for all money funds. The text of the bill says, "Ms. Moore (for herself, Mr. Stivers, Mr. Hastings, Mr. Gonzalez of Texas, Mr. Michael F. Doyle of Pennsylvania, Mr. Estes, and Mr. Mooney of West Virginia) introduced the following bill; which was referred to the Committee on Financial Services.... To protect the investment choices of investors in the United States, and for other purposes." It explains, "This Act may be cited as the 'Consumer Financial Choice and Capital Markets Protection Act of 2019'.... Treatment of money market funds under the Investment Company Act of 1940. The Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is amended by adding at the end the following: SEC. 66. Money market funds. (a) Definitions. In this section (1) the term 'covered Federal assistance' means Federal assistance ... and (2) the term 'Federal assistance' means -- (A) insurance or guarantees by the Federal Deposit Insurance Corporation; (B) transactions involving the Secretary of the Treasury; or (C) the use of any advances from any Federal Reserve credit facility or discount window that is not part of a program or facility with broad-based eligibility established in unusual or exigent circumstances. (b) Election To be a stable value money market fund. -- (1) IN GENERAL. -- Notwithstanding any other provision of this title, any open-end investment company (or a separate series thereof) that is a money market fund that relies on section 270.2a–7 of title 17, Code of Federal Regulations, may, in the prospectus included in its registration statement filed under section 8 state that the company or series has elected to compute the current price per share, for purposes of distribution or redemption and repurchase, of any redeemable security issued by the company or series by using the amortized cost method of valuation, or the penny-rounding method of pricing, regardless of whether its shareholders are limited to natural persons, if -- (A) the objective or principal investment strategy of the company or series is not inconsistent with the generation of income and preservation of capital through investment in short-term, high-quality debt securities; (B) the board of directors of the company or series elects, on behalf of the company or series, to maintain a stable net asset value per share or stable price per share, by using the amortized cost valuation method, as defined in section 270.2a–7(a) of title 17, Code of Federal Regulations (or successor regulation), or the penny-rounding pricing method, as defined in section 270.2a–7(a) of title 17, Code of Federal Regulations (or successor regulation), and the board of directors of the company has determined, in good faith, that -- (i) it is in the best interests of the company or series, and its shareholders, to do so; and (ii) the money market fund will continue to use such method or methods only as long as the board of directors believes that the resulting share price fairly reflects the market-based net asset value per share of the company or series; and (C) the company or series will comply with such quality, maturity, diversification, liquidity, and other requirements, including related procedural and recordkeeping requirements, as the Commission, by rule or regulation or order, may prescribe or has prescribed as necessary or appropriate in the public interest or for the protection of investors to the extent that such requirements and provisions are not inconsistent with this section." The bill text adds, "(2) EXEMPTION FROM DEFAULT LIQUIDITY FEE REQUIREMENTS. -- Notwithstanding section 270.2a–7 of title 17, Code of Federal Regulations (or successor regulation), no company or series that makes the election under paragraph (1) shall be subject to the default liquidity fee requirements of section 270.2a–7(c)(2)(ii) of title 17, Code of Federal Regulations (or successor regulation). (c) Prohibition against Federal Government bailouts of money market funds. -- Notwithstanding any other provision of law (including regulations), covered Federal assistance may not be provided directly to any money market fund. (d) Disclosure of the prohibition against Federal Government bailouts of money market funds. -- (1) IN GENERAL. -- No principal underwriter of a redeemable security issued by a money market fund nor any dealer shall offer or sell any such security to any person unless the prospectus of the money market fund and any advertising or sales literature for such fund prominently discloses the prohibition against direct covered Federal assistance as described in subsection (c). (2) RULES, REGULATIONS, AND ORDERS. -- The Commission may, after consultation with and taking into account the views of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Department of the Treasury, adopt rules and regulations and issue orders consistent with the protection of investors, prescribing the manner in which the disclosure under this subsection shall be provided. (e) Continuing obligation To meet requirements of this title. -- A company or series that makes an election under subsection (b)(1) shall remain subject to the provisions of this title and the rules and regulations of the Commission thereunder that would otherwise apply if those provisions do not conflict with the provisions of this section." For more, see our previous Crane Data News stories: "House to Vote on Stable NAV Bill" (1/22/18) and "Stable NAV Bill Re-Introduced in House; Amortized Cost for Inst Funds?" (5/24/17).
