Money Market Funds



The Securities and Exchange Commission is in the process of updating its regulatory rules on money market mutual funds. These funds invest in high-quality and short-term debt instruments, such as Treasury bills and commercial paper. Over the past 30 years, money market funds have become a very popular investment vehicle for both individual and institutional investors, offering yields that are higher than interest-bearing bank deposit accounts. Currently, money market funds hold more than $3 trillion in investor assets.

 

Shares of money market funds are priced at a fixed net asset value during each trading day, an amount that is typically $1 per share. During the recent financial crisis, several money market funds faced liquidity problems after the bankruptcy of the Lehman Brothers investment bank on September 15, 2008. One of these funds, The Reserve Primary Fund, experienced a run on its shares and could not meet its redemption requests from investors. On September 16, 2008, the Fund announced that it would "break the buck" by pricing its net asset value for the day at $0.97 a share. This action caused the SEC to issue an order permitting the Fund to suspend redemptions and begin an orderly process to liquidate the Fund.

 

To assist money market funds with similar liquidity problems, the Treasury Department established a temporary program in the fall of 2008 to guarantee deposits in individual fund accounts until the financial crisis was over. Many mutual funds enrolled in this voluntary program.

 

In June 2009, the SEC released for public comment several regulatory proposals to reform its money market rules. These proposals were finalized by the SEC in February 2010, and the agency announced that it would begin a second round of rulemaking on money market funds, to make further changes to its regulatory framework.

 

In the fall of 2010, the President's Working Group on Financial Markets issued a report proposing several wide-ranging regulatory reforms to reduce the susceptibility of money market funds to "liquidity runs." The SEC asked for public comments on this report and the regulatory options presented.

 

CMFI has submitted several comment letters on the proposals issued by the SEC and the President's Working Group to amend federal money market rules. It is expected that the SEC will propose additional rule changes for public comment before the end of 2011. Click on the tabs for Documents, Comments, and Blog Entries to track the latest developments.  

  • CMFI Comment Letter on Proposed SEC Money Market Fund Reforms
    On September 17, 2013, CMFI submitted the attached comment letter to the SEC, in response to the agency's proposed reforms regarding money market funds. In its letter, CMFI asserts that several of the SEC's regulatory proposals, including the retail exemption to a floating NAV requirement and the imposition of redemption fees in a liquidity crisis, create the need to provide money market funds with full transparency into omnibus accounts used by broker-dealers and other financial intermediaries.
  • CMFI Comment Letter to Financial Stability Oversight Council
    On January 21, 2013, CMFI sent a comment letter to the Financial Stability Oversight Council (FSOC) on money market fund reforms. The FSOC recently published a series of proposed recommendations regarding the regulatory framework for these funds, to reduce the risk of a "run" on assets in a future financial crisis. Several of the FSOC regulatory proposals are unworkable without full transparency within omnibus accounts. This CMFI comment letter explains the operational challenges involved and proposes a cost-effective solution for both funds and their investors.
  • CMFI Letter to SEC Commissioners Gallagher and Paredes
    On November 15, 2012, CMFI sent a letter to SEC Commissioners Daniel Gallagher and Troy Paredes, in response to their public statement on August 28, 2012, regarding the regulation of money market funds. CMFI believes that the regulatory alternative proposed by these two Commissioners, which would permit fund boards to impose "gates" on redemptions in a financial crisis, cannot be implemented accurately and fairly within non-transparent omnibus accounts.
  • CMFI Letter to SEC Commissioner Luis Aguilar
    On March 8, 2012, CMFI sent a letter to SEC Commissioner Luis Aguilar about money market fund regulation. CMFI's letter was in response to Commissioner Aguilar's public statement that the SEC should address transparency problems in money market investment vehicles before regulators consider imposing additional structural reforms affecting these funds.
  • CMFI Comment Letter on Obama Money Market Fund Proposals
    On January 21, 2011, CMFI submitted a comment letter in response to the study on money market funds issued by the President’s Working Group on Financial Markets. This study included several possible reforms to mitigate the susceptibility of money market funds to “liquidity runs.”
  • Public Comments Submitted to the SEC on Obama Money Market Fund Proposals
    The SEC publishes comment letters on its website within a few days of receiving them.
  • SEC Request for Public Comments on Obama Money Market Fund Proposals
    On November 3, 2010, the SEC asked for public comments on the money market fund study issued by the President’s Working Group on Financial Markets.
  • President’s Working Group Study on Money Market Fund Reforms
    On October 21, 2010, the President’s Working Group on Financial Markets issued a study discussing possible reforms to mitigate the susceptibility of money market funds to “liquidity runs.”
  • SEC Final Rules on Money Market Funds
    On February 23, 2010, the SEC issued its final rules on money market funds.
  • CMFI Comment Letter on Proposed SEC Money Market Fund Rules
    On September 10, 2009, CMFI submitted a comment letter to the SEC in response to its proposed rules on money market funds.
  • Public Comments on SEC Proposed Money Market Fund Rules
    The SEC publishes comment letters on its website within a few days of receiving them.
  • SEC Proposed Rules on Money Market Funds
    On June 30, 2009, the SEC released several regulatory proposals to reform its money market fund rules.
  • Investment Company Institute Recommendations on Money Market Funds
    On March 17, 2009, the Investment Company Institute (ICI) released the recommendations of its Money Market Working Group. Among other recommendations, the ICI Working Group advocated that the industry adopt more “robust” shareholder transparency procedures within third-party omnibus accounts to mitigate fund liquidity risks.
  • CMFI Comment Letter on SEC Interim Money Market Fund Rule
    On December 14, 2008, CMFI submitted a comment letter in response to the SEC’s interim final temporary rule on money market funds.
  • Public Comments on SEC Interim Money Market Fund Rule
    The SEC publishes comment letters on its website within a few days of receiving them.
  • SEC Interim Rule on Money Market Funds
    On November 20, 2008, the SEC issued an interim final temporary rule to provide relief from certain regulations for money market funds participating in the Treasury Department’s guarantee program.
  • CMFI Letter on Treasury Department Money Market Fund Guarantee Program
    On October 23, 2008, CMFI sent a letter to Treasury Secretary Henry Paulson, expressing concern that its Money Market Fund Guarantee program does not provide adequate protection for individual investors who purchased money market fund shares through third-party intermediaries.
  • Frequently Asked Questions on the Treasury Department Guarantee Program
    On September 29, 2008, the Treasury Department released a Frequently Asked Questions document about its Temporary Guarantee Program for Money Market Funds.
  • Treasury Department Money Market Fund Guarantee Program
    On September 29, 2008, the Treasury Department announced a Temporary Guarantee Program for Money Market Funds. This program provides a U.S. government guarantee on the share price of any eligible money market fund that applies for and pays a fee to participate in this program. As a result of the 2008 financial crisis, many money market funds enrolled in this program.
  • good info!
    20 September, 2011 - Randy Kime

    good info!

The Securities and Exchange Commission is in the process of updating its regulatory rules on money market mutual funds. These funds invest in high-quality and short-term debt instruments, such as Treasury bills and commercial paper. Over the past 30 years, money market funds have become a very popular investment vehicle for both individual and institutional investors, offering yields that are higher than interest-bearing bank deposit accounts. Currently, money market funds hold more than $3 trillion in investor assets.

 

Shares of money market funds are priced at a fixed net asset value during each trading day, an amount that is typically $1 per share. During the recent financial crisis, several money market funds faced liquidity problems after the bankruptcy of the Lehman Brothers investment bank on September 15, 2008. One of these funds, The Reserve Primary Fund, experienced a run on its shares and could not meet its redemption requests from investors. On September 16, 2008, the Fund announced that it would "break the buck" by pricing its net asset value for the day at $0.97 a share. This action caused the SEC to issue an order permitting the Fund to suspend redemptions and begin an orderly process to liquidate the Fund.

 

To assist money market funds with similar liquidity problems, the Treasury Department established a temporary program in the fall of 2008 to guarantee deposits in individual fund accounts until the financial crisis was over. Many mutual funds enrolled in this voluntary program.

 

In June 2009, the SEC released for public comment several regulatory proposals to reform its money market rules. These proposals were finalized by the SEC in February 2010, and the agency announced that it would begin a second round of rulemaking on money market funds, to make further changes to its regulatory framework.

 

In the fall of 2010, the President's Working Group on Financial Markets issued a report proposing several wide-ranging regulatory reforms to reduce the susceptibility of money market funds to "liquidity runs." The SEC asked for public comments on this report and the regulatory options presented.

 

CMFI has submitted several comment letters on the proposals issued by the SEC and the President's Working Group to amend federal money market rules. It is expected that the SEC will propose additional rule changes for public comment before the end of 2011. Click on the tabs for Documents, Comments, and Blog Entries to track the latest developments.  

Document Title: 
CMFI Comment Letter on Proposed SEC Money Market Fund Reforms
Document Desc: 
On September 17, 2013, CMFI submitted the attached comment letter to the SEC, in response to the agency's proposed reforms regarding money market funds. In its letter, CMFI asserts that several of the SEC's regulatory proposals, including the retail exemption to a floating NAV requirement and the imposition of redemption fees in a liquidity crisis, create the need to provide money market funds with full transparency into omnibus accounts used by broker-dealers and other financial intermediaries.
Document Title: 
CMFI Comment Letter to Financial Stability Oversight Council
Document Desc: 
On January 21, 2013, CMFI sent a comment letter to the Financial Stability Oversight Council (FSOC) on money market fund reforms. The FSOC recently published a series of proposed recommendations regarding the regulatory framework for these funds, to reduce the risk of a "run" on assets in a future financial crisis. Several of the FSOC regulatory proposals are unworkable without full transparency within omnibus accounts. This CMFI comment letter explains the operational challenges involved and proposes a cost-effective solution for both funds and their investors.
Document Title: 
CMFI Letter to SEC Commissioners Gallagher and Paredes
Document Desc: 
On November 15, 2012, CMFI sent a letter to SEC Commissioners Daniel Gallagher and Troy Paredes, in response to their public statement on August 28, 2012, regarding the regulation of money market funds. CMFI believes that the regulatory alternative proposed by these two Commissioners, which would permit fund boards to impose "gates" on redemptions in a financial crisis, cannot be implemented accurately and fairly within non-transparent omnibus accounts.
Document Title: 
CMFI Letter to SEC Commissioner Luis Aguilar
Document Desc: 
On March 8, 2012, CMFI sent a letter to SEC Commissioner Luis Aguilar about money market fund regulation. CMFI's letter was in response to Commissioner Aguilar's public statement that the SEC should address transparency problems in money market investment vehicles before regulators consider imposing additional structural reforms affecting these funds.
Document Title: 
CMFI Comment Letter on Obama Money Market Fund Proposals
Document Desc: 
On January 21, 2011, CMFI submitted a comment letter in response to the study on money market funds issued by the President’s Working Group on Financial Markets. This study included several possible reforms to mitigate the susceptibility of money market funds to “liquidity runs.”
Document Title: 
Public Comments Submitted to the SEC on Obama Money Market Fund Proposals
Document Desc: 
The SEC publishes comment letters on its website within a few days of receiving them.
Document Title: 
SEC Request for Public Comments on Obama Money Market Fund Proposals
Document Desc: 
On November 3, 2010, the SEC asked for public comments on the money market fund study issued by the President’s Working Group on Financial Markets.
Document Title: 
President’s Working Group Study on Money Market Fund Reforms
Document Desc: 
On October 21, 2010, the President’s Working Group on Financial Markets issued a study discussing possible reforms to mitigate the susceptibility of money market funds to “liquidity runs.”
Document Title: 
SEC Final Rules on Money Market Funds
Document Desc: 
On February 23, 2010, the SEC issued its final rules on money market funds.
Document Title: 
CMFI Comment Letter on Proposed SEC Money Market Fund Rules
Document Desc: 
On September 10, 2009, CMFI submitted a comment letter to the SEC in response to its proposed rules on money market funds.
Document Title: 
Public Comments on SEC Proposed Money Market Fund Rules
Document Desc: 
The SEC publishes comment letters on its website within a few days of receiving them.
Document Title: 
SEC Proposed Rules on Money Market Funds
Document Desc: 
On June 30, 2009, the SEC released several regulatory proposals to reform its money market fund rules.
Document Title: 
Investment Company Institute Recommendations on Money Market Funds
Document Desc: 
On March 17, 2009, the Investment Company Institute (ICI) released the recommendations of its Money Market Working Group. Among other recommendations, the ICI Working Group advocated that the industry adopt more “robust” shareholder transparency procedures within third-party omnibus accounts to mitigate fund liquidity risks.
Document Title: 
CMFI Comment Letter on SEC Interim Money Market Fund Rule
Document Desc: 
On December 14, 2008, CMFI submitted a comment letter in response to the SEC’s interim final temporary rule on money market funds.
Document Title: 
Public Comments on SEC Interim Money Market Fund Rule
Document Desc: 
The SEC publishes comment letters on its website within a few days of receiving them.
Document Title: 
SEC Interim Rule on Money Market Funds
Document Desc: 
On November 20, 2008, the SEC issued an interim final temporary rule to provide relief from certain regulations for money market funds participating in the Treasury Department’s guarantee program.
Document Title: 
CMFI Letter on Treasury Department Money Market Fund Guarantee Program
Document Desc: 
On October 23, 2008, CMFI sent a letter to Treasury Secretary Henry Paulson, expressing concern that its Money Market Fund Guarantee program does not provide adequate protection for individual investors who purchased money market fund shares through third-party intermediaries.
Document Title: 
Frequently Asked Questions on the Treasury Department Guarantee Program
Document Desc: 
On September 29, 2008, the Treasury Department released a Frequently Asked Questions document about its Temporary Guarantee Program for Money Market Funds.
Document Title: 
Treasury Department Money Market Fund Guarantee Program
Document Desc: 
On September 29, 2008, the Treasury Department announced a Temporary Guarantee Program for Money Market Funds. This program provides a U.S. government guarantee on the share price of any eligible money market fund that applies for and pays a fee to participate in this program. As a result of the 2008 financial crisis, many money market funds enrolled in this program.