SEC Requests Comment on Potential Money Market Fund Reform Options Highlighted in President’s Working Group Report
On February 4, the Securities and Exchange Commission published a request for public comment (Comment Request) on potential reform measures to improve the resilience of money market funds, as highlighted in a report of the President’s Working Group on Financial Markets issued in December 2020 (Report).
In the Report, the President’s Working Group on Financial Markets noted that certain short-term funding markets experienced stress in March 2020 amid economic concerns related to the onset of the COVID-19 pandemic. Ultimately, the President’s Working Group on Financial Markets concluded that more work is needed to reduce the risk that structural vulnerabilities in prime and tax-exempt money market funds will lead to or exacerbate stresses in short-term funding markets. The Report discusses various reform measures that policymakers could consider including (1) removal of the tie between Money Market Fund (MMF) liquidity and fee and gate thresholds; (2) reform of conditions for imposing redemption gates; (3) minimum balance at risk requirements; (4) money market fund liquidity management; (5) creating countercyclical weekly liquid asset requirements; (6) floating NAVs for all prime and tax-exempt money market funds; (7) swing pricing requirement; (8) capital buffer requirements; (9) requiring liquidity exchange bank membership; and (10) potential new requirements governing sponsor support.
The SEC is requesting public comment on the Report, including the effectiveness of the previously-enacted money market fund reforms and of implementing the potential policy measures described in the Report.
The public comment period will remain open for 60 days following publication of the comment request in the Federal Register.