The Securities & Exchange Commission will discuss and likely adopt its final Money Market Fund Reform proposals Wednesday morning starting at 10:00 a.m. (To view the live webcast, click here.) The Open Meeting Agenda including "Money Market Fund Reform" features Division of Investment Management staff Robert E. Plaze, C. Hunter Jones, Penelope Saltzman, Sarah ten Siethoff, Thu B. Ta, Adam Glazer, and Daniele Marchesani.
The agenda says, "The Commission will consider a recommendation to adopt new rules, rule amendments, and a new form under the Investment Company Act of 1940 governing money market funds, to increase the protection of investors, improve fund operations, and enhance fund disclosures. Look for details from a press release and summary around 9:30 a.m. Wednesday, and watch for the full Final Money Market Fund Reform amendments to be posted over the next couple of days. (Check here to see where the final rules should appear around Friday.)
Some of the final rules appear to have leaked already with some stories appearing Tuesday night. The Wall Street Journal says in "SEC To Vote Wed On Rules For Money-Market Funds", "The U.S. Securities and Exchange Commission on Wednesday will vote on rules requiring money-market mutual funds to disclose slight fluctuations around their $1-a-share price, but regulators will leave in place the current $1 standard, according to people familiar with the rule's content. The SEC is scheduled to vote on final rules designed to reduce the risk and volatility of money-market mutual funds. The rule, which is still being finalized, will require funds to disclose fluctuations around $1, called a 'shadow price,' on a monthly basis with a 60-day lag, these people said.... The final rule won't make any changes to the current net asset value framework. But regulators are likely to state that future rules could include a floating standard."
The Journal article continues, "The rule also will include uniform mandatory liquidity requirements for money-market funds at an institutional-investor level, requiring a minimum of 10% of assets to be in liquid securities on a daily basis and 30% on a weekly basis. The SEC had proposed a lower standard for retail investors, but regulators decided after receiving public comment that dual-liquidity standards were too complex to implement and monitor.... In a change to the proposed rule, the SEC decided that it wouldn't ban outright investments in so-called second-tier securities, or those that don't have the highest rating. Instead, the final rule will include limits on money-market funds' use of second-tier securities, limiting their exposure to 3% overall and 0.5%% of any individual second-tier security. The maturity window for second-tier securities also will be reduced from 397 days to 45 days."
Reuters says in "US SEC mull tough rules for money market funds", "The agency is considering requiring money market funds to hold a minimum of 10 percent of their assets in liquid securities and may shorten the average maturity of debt the funds can hold to 60 days from 90 days, the sources said. At a meeting Wednesday, the SEC will also consider requiring funds to publicly disclose the net asset value, or value of each share of a money fund, on a 60-day lag basis.... The agency may consider at a later date other changes that could include a fluctuating net asset value."
Finally, Bloomberg quotes Peter Crane in its "SEC Said to Drop Plan to Bar Money Funds From Lower-Rated Debt," "They are really fighting and clawing over inches.... The vast majority of the changes that the SEC proposed and likely will adopt, most of the industry has been adhering to already." Crane adds, "The SEC rules 'are seen as a necessary evil because you have to do something'.... People are more concerned about the President's Working Group and the re-emergence of Paul Volcker. There's still a slim chance of radical change."
