SIFMA ASSET MANAGERS’ GROUP SUPPORTS U.S. MONEY-MARKET-FUND RULE CHANGES

Posted September 9, 2009

NEW YORK – The Asset Management Group (AMG) of the US Securities Industry and Financial Markets Association (SIFMA) is backing the US Securities and Exchange Commission's goals of (a) increasing the resilience of money market mutual funds to economic stresses, (b) reducing the risks of significant redemptions on the funds, (c) facilitating the orderly liquidation of a money market fund that breaks the dollar and liquidates, and (d) improving the SEC’s oversight of money market mutual funds.

“SIFMA’s Asset Management Group is focused on improving the operations, efficiency, and trust in capital markets, enhancing regulatory effectiveness and addressing the ‘nuts and bolts’ of the buy side’s operations,” says Joseph W. Sack, Managing Director of the AMG. “We generally support the Commission’s proposals, which we expect will help achieve these goals, maintain investors’ confidence and further the soundness of the approximately $3.6 trillion in money market mutual funds which are an integral part of financing for federal, state and local government entities as well as corporations and financial institutions.”

The SEC is looking at new rules for money market mutual funds including enhancement of Rule 2a-7, which limits the risk these funds may take. [The American Securitization Forum has stated that proposed money market mutual fund regulation will restrict bank liquidity – see News Update earlier today here.]

According to the AMG, proposed enhancements to risk-limiting conditions of Rule 2a-7 and liquidity requirements would make it less likely that a money market fund will break the dollar; the proposed liquidity requirements would decrease the risk of unexpected redemptions in a fund and lessen the impact of those redemptions; the proposals dealing with Board actions upon exigent circumstances would protect shareholders by improving the liquidation process; and the proposed reporting requirements would enable the Commission to better achieve its oversight mandate.

While SIFMA is generally supportive of the Commission's proposal to impose a minimum percentage liquidity requirement, a majority of the members of the AMG strongly oppose requiring different cash minimums for retail and institutional funds. At the same time, other members of the AMG strongly advocate differing cash requirements for retail and institutional funds based on their view of the differing liquidity needs of retail and institutional shareholders.