U.S. SEC Approves Sweeping Amendments to Rules Governing Money Market Funds

The U.S. Securities and Exchange Commission (SEC or Commission) on July 23, 2014 approved, by a vote of 3- 2, sweeping amendments to Rule 2a - 7 and other rules that govern money market funds (money funds) under the Investment Company Act of 1940 (1940 Act) (Amendments). The Amendments gene rally combine the two alternatives set forth in the proposing release issued in 2013 (Proposing Release) 2 – (i) requiring “institutional” money funds to operate with a floating net asset value (NAV), rounded to the fourth decimal place ( e.g. , $1.0000) and (ii) permitting (and, under certain circumstances, requiring) all money funds to impose a “liquidity fee” (up to 2%) and/or “redemption gate ,” once weekly liquidity levels fall below the required regulatory threshold . At the meeting approving the Amendment s, SEC Chair White stated thatthe Amendments “fundamentally change the way that most money market funds operate [and] will reduce the risk of runs in money market funds and provide important new tools that will help further protect investors and the financial system in a crisis.”

The Amendments also included other notable changes, such as tightening the diversification requirements under Rule 2a - 7, enhancing disclosure requirements and strengthening the stress testing standards of money fund portfolios. T he Amendments also revised Form PF to increase reporting obligations of registered investment advisers to unregistered money funds, which includes requirements for those advisers to disclose the funds’ portfolio holdings and certain other information. Fina lly, the Amendments contained a number of revisions to clarify certain provisions of Rule 2a - 7.

This DechertOnPoint briefly discusses the background and the events leading up the Amendments and describes each of the reforms made by the Amendments.

Please see full Article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.