Stradley Ronon's Joan Ohlbaum Swirsky and Amy Smith released a client alert entitled, "Buried Treasures or Hidden Landmines? What You May Have Overlooked in the 893-Page Money Market Reform Adopting Release." The brief piece says, "Since the SEC adopted money market fund reforms on July 23, 2014, practitioners have been digesting the 893-page adopting release (the Release). In this alert, we excerpt from the SEC's commentary in the Release and provide our observations to help guide funds' compliance efforts. The commentary does not carry the force of the text of the money market fund rule itself (the Rule), but it may inform the SEC's examination staff and conceivably could be raised as authority in enforcement proceedings. Accordingly, the Release is both a treasure trove and a minefield for the practitioner, providing practical guidance but also overlaying additional compliance advice around the 37-page Rule itself. Here we have included Release excerpts relating to some topics that have already been widely dissected by practitioners (such as the SEC's unexpectedly placed valuation commentary for all funds and its advice on identifying "retail" shareholders) and also excerpts on topics not yet widely addressed (such as some stress testing and disclosure guidance). Page references are to the SEC's version of the Release on its website. For a summary of the reforms, see our Fund Alert, "What You Need to Know About Money Market Fund Reform." In summary, the SEC's rules will require institutional prime and institutional municipal money market funds to replace their current $1.00 stable share price with a floating net asset value (NAV). The reforms also will authorize fund boards to impose a liquidity fee of up to 2 percent and/or a redemption gate (for no more than 10 business days in any 90-day period) if weekly liquid assets in the fund fall below 30 percent of assets. A liquidity fee of 1 percent would be imposed if weekly liquid assets fall below 10 percent of assets, unless the fund board takes action to eliminate, reduce or increase the fee (but not to more than 2 percent)."
