SEC Proposes New Round of Money Market Fund Reforms in Response to March 2020 Redemptions

The Securities and Exchange Commission, by a vote of three-to-two, on December 15, 2021, proposed amendments (Proposed Amendments) to Rule 2a-7 and other rules that govern money market funds (money funds) under the Investment Company Act of 1940. The Proposed Amendments would substantially raise minimum liquidity levels for all money funds; remove liquidity fee and redemption gate provisions from Rule 2a-7; impose a new swing pricing regime for non-government institutional money funds (i.e., institutional prime and institutional tax-exempt money funds); require money funds to calculate their weighted average maturity (WAM) and weighted average life (WAL) using the market values of their portfolios securities; and amend certain reporting requirements in Forms N-MFP and N-CR. The Proposed Amendments also would set forth the SEC’s view that it would be inappropriate for a stable net asset value (NAV) money fund with a gross negative yield to continue to seek to maintain a stable NAV.

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