The deadline to comment on the SEC's Proposed Rule, "Removal of Certain References to Credit Ratings and Amendment to the Issuer Diversification Requirement in the Money Market Fund Rule," is Wednesday, October 14. (We covered the proposal in our August 5 "News", "SEC Proposal to Remove Credit Ratings Eliminates First, Second Tier.") Just one substantial recent comment has been posted so far (there are plenty from 2011, when removing ratings from Rule 2a-7 was first proposed). The new letter is from Amy Lancellota, managing director, Independent Directors Council. Lancellotta writes, "The Independent Directors Council appreciates the opportunity to provide comments on the Securities and Exchange Commission's re-proposal to remove certain references to credit ratings in the money market fund rule. Although IDC had previously urged the Commission to retain the references to credit ratings, we recognize that the Commission is implementing a Congressional directive in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).... Given this mandate, IDC is generally supportive of the approach taken in the re-proposal, which reflects comments raised by IDC and others on the initial proposal. Our specific comments are provided below." She continues, "Under the Commission's initial proposal, in place of the requirement that eligible securities be rated or of comparable quality, a fund board (or its delegate) would have been required to: (1) determine whether securities are eligible securities based on minimal credit risks; and (2) distinguish between first and second tier securities based on subjective standards (e.g., "highest capacity to meet its short-term financial obligations" for a first tier security). IDC and others expressed concern about the proposed approach and recommended eliminating the first and second tier categories and subjecting eligible securities to one uniform, very high standard. IDC and others also stated concern about the "highest capacity" standard, which does not seem to contemplate a range of ratings. The re-proposal responds to these concerns by eliminating the distinction between first and second tier securities and using the "exceptionally strong capacity" standard. We support this approach."
