SIFMA issued the following statement from president and CEO Kenneth E. Bentsen, Jr. on the Securities and Exchange Commission’s vote to adopt changes to Rule 2a-7 that govern the operation of U.S. money market funds:

“SIFMA is pleased that the SEC opted against imposing swing pricing on money market funds.  While we remain skeptical that anti-dilution measures are necessary, the path of liquidity fees for institutional money market funds is a more feasible alternative. Additionally, SIFMA is pleased that the Commission removed fees and gates from Rule 2a-7. SIFMA supports increased daily and weekly minimums.  Together, these measures are sufficient to enhance money market fund resiliency in light of March 2020 events.

“Money market funds play an important role in the orderly functioning of the short-term funding markets. Investors include individual retail investors, retirement accounts, college savings plans, health savings plans, endowments, small businesses, corporate treasurers, pension plans, state and local governments, variable annuities, insurance companies, and nonprofit organizations.

“While we support the goals of enhancing resilience of money market funds, we remain concerned that imposing additional fees and operational costs on shareholders could adversely impact money market funds.  We encourage the SEC to closely monitor the implementation of these new rule amendments and stand ready to assist funds as questions and challenges arise, particularly in light of a compliance date only a year in the future that comes amidst other crucial operational priorities such as the move to T+1.   We also trust that the SEC will monitor the impact of these amendments and make future refinements as warranted to ensure that money market funds can continue to play their important role in financial markets.”

Source: SIFMA

Today we adopted amendments to certain rules to reduce the risk of investor runs on money market funds during periods of market stress.
https://t.co/IbZqPsJV7P pic.twitter.com/cvU1L5HG8t

— U.S. Securities and Exchange Commission (@SECGov) July 12, 2023

SEC Adopts Money Market Fund Reforms and Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers

The Securities and Exchange Commission adopted amendments to certain rules that govern money market funds under the Investment Company Act of 1940.

The amendments will increase minimum liquidity requirements for money market funds to provide a more substantial liquidity buffer in the event of rapid redemptions. The amendments will also remove provisions in the current rule that permit a money market fund to suspend redemptions temporarily through a gate and allow money market funds to impose liquidity fees if their weekly liquid assets fall below a certain threshold. These changes are designed to reduce the risk of investor runs on money market funds during periods of market stress.

To address concerns about redemption costs and liquidity, the amendments will require institutional prime and institutional tax-exempt money market funds to impose liquidity fees when a fund experiences daily net redemptions that exceed 5 percent of net assets, unless the fund’s liquidity costs are de minimis. In addition, the amendments will require any non-government money market fund to impose a discretionary liquidity fee if the board determines that a fee is in the best interest of the fund. These amendments are designed to protect remaining shareholders from dilution and to more fairly allocate costs so that redeeming shareholders bear the costs of redeeming from the fund when liquidity in underlying short-term funding markets is costly.

“Money market funds – nearly $6 trillion in size today – provide millions of Americans with a deposit alternative to traditional bank accounts,” said SEC Chair Gary Gensler. “Money market funds, though, have a potential structural liquidity mismatch. As a result, when markets enter times of stress, some investors – fearing dilution or illiquidity – may try to escape the bear. This can lead to large amounts of rapid redemptions. Left unchecked, such stress can undermine these critical funds. I support this adoption because it will enhance these funds’ resiliency and ability to protect against dilution. Taken together, the rules will make money market funds more resilient, liquid, and transparent, including in times of stress. That benefits investors.”

Separately, the amendments will also modify certain reporting forms that are applicable to money market funds and large private liquidity funds advisers.

The rule amendments will become effective 60 days after publication in the Federal Register with a tiered transition period for funds to comply with the amendments. The reporting form amendments will become effective June 11, 2024.

Source: SEC