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Wednesday, September 18, 2013

ABA Urges SEC Not to Adopt MMF ‘Alternatives’

ABA has urged the SEC not to adopt its proposal to increase regulation of money market mutual funds. It said that the reforms adopted in 2010 have significantly reduced risk from MMFs and should be allowed to demonstrate their effectiveness.

The SEC in June proposed one or both of two alternatives: requiring institutional prime MMFs to have a floating net asset value, instead of the current practice of fixing the NAV at $1 per share, and requiring MMFs to impose a 2% liquidity fee on redemptions when the weekly liquid asset level falls below 15% of total assets.

ABA said that the alternatives would drive banks, customers and other investors out of MMFs subject to the proposal “because the product would no longer have the attributes they value so highly.” The association said that the proposal’s enhanced disclosure requirements would help to achieve the SEC’s goals without alternatives one and two.

Read the letter.

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