Firms Comment on Money Market Funds Reform

A number of firms that manage money market mutual funds have made comments to the Securities and Exchange Commission (SEC) about proposed reforms of such funds.

BlackRock, Inc., Fidelity Investments, Invesco Ltd., Legg Mason and Company, Western Asset Management Company, T. Rowe Price Associates, Inc., Vanguard and Wells Fargo Funds Management all signed a letter sent to the SEC. They began with support for SEC’s goal to preserve money market mutual funds for retails investors who have “found it to be convenient and beneficial,” citing a portion of the SEC proposed regulations that would create an exemption for retail money market funds from a floating NAV (net asset value) requirement.

In addition, the letter addressed a daily redemption limit proposed by the SEC, which the firms feel would “be burdensome to implement for both funds and third-party intermediaries, resulting in significant costs and operational complexity.” As an alternative, the letter recommended that the SEC use a definition, derived from the Investment Company Act of 1940, for retail money market mutual funds that reads, “Retail fund means a fund that limits beneficial ownership interest to natural persons.” This definition would include people investing in money market mutual funds through individual accounts, retirement accounts, college savings plans, health savings plans and ordinary trusts.

The letter elaborated that this definition offered multiple advantages. First, it would preserve such funds for investors whose redemption activity did not threaten a fund’s liquidity or stability. Second, the definition would provide a front-end qualifying test and eliminate the need for costly programming and ongoing monitoring by a fund adviser or other intermediary. Third, it would allow the use of data that fund advisers and intermediaries already collect.

The full text of the letter to the SEC can be found here.