Less than a month remains until the SEC's Money Market Fund Reforms go into effect, although most of the major portfolio changes are slated for May 28 and June 30 deadlines. The overall effective date is May 5; the quality, maturity, diversification, liquidity and stress test date is May 28; the WAM and modified WAM dates are June 30; and the first website disclosure deadline is Oct. 7. Below, we again excerpt from the rules and discuss the changes.
The SEC's changes (see p.101 for Compliance Dates) explain, "The amendments to rules 2a-7, 17a-9 and 30b1-6T, and new rules 22e-3 and 30b1-7, and new Form N-MFP become effective May 5, 2010. Unless otherwise discussed below or in this Release, the compliance date is the date of effectiveness.... Except as indicated below, the compliance date for amendments to rule 2a-7 related to portfolio quality, maturity, liquidity, and repurchase agreements, is May 28, 2010. Funds are not required to dispose of portfolio securities owned, or terminate repurchase agreements entered into, as of the time of adoption of the amendments to comply with the requirements of the rule as amended. Fund portfolios must meet the new maximum WAM and WAL limits by June 30, 2010."
J.P. Morgan Securities weekly "Short-Term Fixed Income" says, "And the countdown begins. The SEC's amended rules governing money market funds begin to phase in next month and are already affecting portfolio activity on the short end of the yield curve. Several of the reforms have direct implications for portfolio management. Of these reforms, weighted average maturity (WAM), weighted average life (WAL), and liquidity requirements are the most immediate as non-compliance with these rules will force funds to limit activity, restricting the extension of credit until the fund returns to compliance."
JPM also discusses funds shortening WAMs recently. According to Crane Data's Money Fund Intelligence XLS, the 100 largest taxable money funds (our Crane 100) shortened weighted average maturities on average by 5 days in March, from 48 to 43 days. Our broader Crane Money Fund Average, which includes 868 taxable money market mutual funds, has decreased from 49 days at its recent peak in October 2009 to 41 days as of March 31. So it appears funds are fully prepared and will have little trouble meeting the SEC's new maturity requirements.
The SEC's new final rules also say, "Each fund must disclose the designated NRSROs in its Statement of Additional Information pursuant to amended rule 2a-7(a)(11)(iii) no later than December 31, 2010." (The 10 NRSROs listed to date include: S&P, Moody's, Fitch, A.M. Best Company, DBRS, Japan Credit Rating Agency Ltd., R&I, Egan-Jones, LACE Financial, and Realpoint.) They add, "The compliance date for public website disclosure is October 7, 2010.... All money market funds must begin filing information on Form N-MFP pursuant to rule 30b1-7 no later than December 7, 2010.... Funds must comply with the new requirement to be able to process transactions at prices other than stable net asset value no later than October 31, 2011."
Reed Smith's Stephen Keen commented on the holdings disclosure during a recent webinar, "[T]he good news is the first time you have to make website disclosure is not until October, showing your portfolio at the end of September. And the first time you have to do the [Form N-MFP] SEC filing won't be until December, showing your portfolio at the end of November.... So we've got a while to keep working on these things. A lot of people already post monthly information at a minimum on their websites, so the notion of making public disclosure of money market fund portfolios on a basis more frequently than is required by the earlier regulations is not novel and a lot of people are already equipped to do that. The difference, though, is now there is a lot more definition to what has to go up on the website and how long it has to be maintained and so forth. So everyone needs to realign with that."
