Dreyfus Comments on Muni MMFs
After a long pause, another letter was recently posted on the SEC's "Comments on Proposed Rule: Money Market Fund Reform; Amendments to Form PF" website. Written by J. Charles Cardona, Jr., President, The Dreyfus Corporation, it says, "The Dreyfus Corporation ("Dreyfus") appreciates the opportunity to provide additional comments on the U.S. Securities and Exchange Commission's (the "Commission") June 2013 money market fund ("MMF") reform proposals (the "Proposals"). The comments in this letter are limited to the Proposals related to municipal money market funds ("Municipal MMFs") and supplement the comments we provided in our comprehensive comment letter in response to the Proposals filed with the Commission on September 17, 2013. Dreyfus supported the Commission's overall policy goals to lessen MMFs' sensitivity to excess redemption activity, increase MMFs' ability to manage through and mitigate potential contagion from high levels of redemptions, impose transparency and risk management overlays, and preserve, as much as possible, the utility of MMFs. We also welcomed the Commission's intent to tailor any proposed reforms to the types of funds that demonstrated stress during the financial crisis and to preserve the intrinsic value of MMFs by excluding U.S. Government money market funds ("Government MMFs") from the proposed mandates of a variable net asset value ("VNAV") and standby liquidity fees and gates structures (collectively, the "Structural Proposals") as well as providing a "retail exception" from the VNAV alternative that would allow for certain funds to maintain a constant net asset value ("CNAV"). Our letter emphasized three Proposals most concerning to us because we viewed each as likely to diminish, rather than preserve, the overall utility of MMFs for MMF investors. These Proposals were (a) the VNAV alternative; (b) the Commission's decision not to exclude Municipal MMFs from the Structural Proposals as the Commission proposed to exclude Government MMFs; and (c) eliminating amortized cost as a means for valuing certain portfolio securities owned by CNAV MMFs. With respect to Municipal MMFs, we commented that Municipal MMFs should be excluded from the Structural Proposals to the same extent as Government MMFs."
