SEC Money Market Reform

• These changes will be subject to a lengthy implementation process, up to a year for some provisions, following the publication of the final rules in the Federal Register.
  
• The most notable changes are; the minimum daily liquidity requirement minimum daily liquidity requirement will be increased from 10% to 25% of a fund’s total assets. This provision does not apply to tax exempt funds. The minimum weekly liquidity requirement will be increased from 30% to 50% of a fund’s total assets. Importantly, the requirement to impose fees and/or gates on redemptions when a fund falls below these percentages (which had inhibited funds from actually using that liquidity in a crisis) is being removed.
• A new requirement for Floating Net Asset Value (FNAV) Prime and municipal money market funds implement a liquidity fee, based on an estimate of the fund’s liquidity costs, if the fund has total net redemptions that day which exceed 5% of the fund’s net assets, unless those costs are de minimis.
• Elimination of the language related to the temporary suspensions of redemptions and, therefore, money market funds will no longer be subject to what is commonly referred to as “gating”.
• A new amendment addresses a potential negative interest rate environment. This allows a Constant NAV (CNAV) money market fund to reduce the number of its shares outstanding to maintain a stable share price, in addition to its existing ability to convert to a FNAV. Utilization of these measures will be subject to certain board determinations and disclosures to investors.

What you need to do

• No immediate action is required as these changes are subject to a lengthy implementation process, up to a year for some provisions.
• Further decisions and clarifications are expected from the SEC, the IRS, and relevant accounting bodies, and we expect to provide further updates as more information becomes available over the coming weeks and months.
• We look forward to helping you understand these rules and their implications. Please contact us with any questions.