Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

2502

Investment Company Institute endorses reforms to strengthen money-market funds

RELATED TOPICS​

The board of governors of the US Investment Company Institute has announced that it has unanimously endorsed recommendations from the Money Market Working Group concerning new regulator

The board of governors of the US Investment Company Institute has announced that it has unanimously endorsed recommendations from the Money Market Working Group concerning new regulatory and oversight standards for money market funds.

John J. Brennan, chairman of the Money Market Working Group and of the Vanguard Group, reported to the board: "The recommendations respond directly to weaknesses in current money market fund regulation, identify additional reforms that will improve the safety and oversight of money market funds, and will position responsible government agencies to oversee the orderly functioning of the money market more effectively."

The institute’s governing body called for prompt implementation by all money market fund complexes of those practices recommended in the Report of the Money Market Working Group that do not require prior regulatory action.

ICI formed the Money Market Working Group last Autumn to develop recommendations to improve the functioning and regulation of the money market and money market funds.

Among other changes, the recommendations would for the first time require money market funds to meet new mandated daily and weekly minimum liquidity standards. The Money Market Working Group also recommends tightening the portfolio maturity limits currently applicable to money market funds and raising credit quality standards.

"The board has given its strong approval to the reforms developed by the Money Market Working Group and deeply appreciates the working group’s efforts," says John V. Murphy, ICI chairman and chairman of OppenheimerFunds. "The board also has called for prompt implementation of these improved practices across the industry, pending regulatory action. In light of the significance of these recommendations to fund investors, ICI will encourage the SEC to require funds choosing not to implement these recommendations to disclose that fact to their investors."

The working group’s recommendations are designed to strengthen and preserve the unique attributes of money market funds: safety, liquidity, and the convenience of a stable USD1.00 net asset value.

The new standards and regulations will ensure that money market funds are better positioned to sustain prolonged and extreme redemption pressures and that mechanisms are in place to ensure that all shareholders are treated fairly if a fund sees its NAV fall below USD1.00.

The report includes a number of recommendations that will impose daily and weekly minimum liquidity requirements and require regular testing of the fund’s individual portfolio holdings and shareholder base; tighten the portfolio maturity limit currently applicable to money market funds and add a new portfolio maturity limit; and raise the credit quality standards under which money market funds operate.

The latter would be accomplished by requiring a "new products" or similar committee to review and approve new structures prior to investment, encouraging advisers to follow "best practices" for determining minimal credit risks, requiring advisers to designate the credit rating agencies their funds will follow to encourage competition among the rating agencies to achieve this designation, and prohibiting investments in "Second Tier Securities’.

The recommendations would also address "client risk" by encouraging money market fund advisers to adopt "know your client" procedures and requiring them for the first time to disclose client concentrations and the potential risks, if any, posed by a fund with a strongly concentrated client base; enhance risk disclosure for investors and the market and require monthly website disclosure of a money market fund’s portfolio holdings; assure that, when a money market fund proves unable to maintain a stable USD1.00 NAV, all of its shareholders are treated fairly; and enhance government oversight of the money market by developing a reporting regime.

Finally, the recommendations aim to increase investor understanding of money market funds and address market confusion about money market participants that appear to be but are not money market funds.

Latest News

Pantheon, a specialist global private markets investor, and iCapital, the global fintech platform, have announced..
Data from Houlihan Lokey’s MidCapMonitor showed that UK sponsor-backed financing activity significantly increased YoY in..
Irish domiciled funds surpassed EUR4.3 trillion AuM (Assets under Management) at end-March 2024, a 15..

Related Articles

Global ESG Investing
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of climate change and ESG factors in state policymaking...
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of..
Trends
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100 million deals announced this month alone...
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100..
Different flavours
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led, multi-boutique global asset manager with over USD20 billion under management, recently undertook a survey with 204 UK investment professionals, seeking insights into their perceptions and attitudes towards boutique asset managers...
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led,..
UK map
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be worth billions of pounds in the coming years...
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by