This article was originally published 8 July, 2009
On June 24, 2009, the Securities and Exchange Commission (the "SEC" or the "Commission") held an open meeting (the "Meeting") to consider a recommendation from the Staff of the Division of Investment Management (the "Division") to propose amendments to Rule 2a-7 (the "Rule") under the Investment Company Act of 1940 (the "Act"). The Commission approved the proposals unanimously and on June 30, 2009, issued a release describing the proposals and solicited further comment on them. These proposals are designed to address primarily the difficulties faced by money market funds and money market fund investors during the recent market events.
The proposed amendments are designed to:
- tighten the risk-limiting provisions of the Rule, particularly those relating to quality and maturity of money market fund portfolios;
- enhance the liquidity of money market funds;
- enhance the level of required disclosure by money market funds to both investors and the SEC;
- provide for procedures to allow money market funds and their administrators to process redemptions at prices other than a $1.00 net asset value ("NAV");
- provide boards of directors with the authority to suspend redemptions if NAV per share falls below $1.00 ("breaks the buck"); and
- expand the ability of affiliates of money market funds to enter into transactions and arrangements with the funds with respect to portfolio securities without obtaining exemptive relief from the SEC.
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