Call it the war of the missives.
Several fund companies and business groups have been writing letters by the barrel to the SEC, critiquing the money market fund proposal, and suggesting which regulations to keep and which ones to throw away.
has read a few of the letters from prominent fund firms for you, so you don't have to.
] supports the requirement of floating NAVs for institutional prime money market funds and stable NAVs for retail prime money market funds but doesn't support the liquidity fees and redemption gates.
Vanguard also supports the daily redemption limits for investors in stable NAV prime money market funds with the stipulation that the limits be raised from $1 million to $3 million, writing, "If the daily redemption limit is not raised, we believe certain exceptions would be necessary to make the $1 million daily redemption limit less disruptive to ordinary retail shareholder activity. Regardless of the dollar limit on redemptions, however, we believe redemptions in retirement plan accounts should be deemed retail activity."
Vanguard writes that it wants the SEC to treat municipal money market funds like government and Treasury money market funds, excluding them from any reforms.
The US Bancorp
] letter, signed by CEO Joseph Ulrey
, President of First American Funds, criticized the gating proposal by saying that although it would be the most effective option in addressing run risk, shareholders may see gating a fund as "analogous" to breaking the buck. That perception, U.S. Bancorp sees the risk of a fund having heavy redemptions both when the gate is removed and as the fund's weekly liquidity nears 15 percent.
U.S. Bancorp also doesn't believe the standby liquidity fee would be effective in deterring shareholders from redeeming their shares in times of extreme market stress, saying that if shareholders are really concerned about a "break the buck" situation they would rather pay the 2 percent than wait for the fund to be wound down.
], signed by Barbara Novick
, vice chairman and Richard Hoerber
, managing director of head of global cash management, wrote, "Adopting regulatory reform that focuses on the specific issues of run risk while narrowing the scope to the most susceptible funds and preserving the benefits of MMFs is critical," supporting several parts of the proposal including, the focus on prime money market funds for the floating NAV proposal and exerting government money market funds, proposing liquidity fees and gates, increasing transparency and increasing stress testing.
However, BlackRock says that combining the floating NAV and standby liquidity fees and fates is "not workable" for investors and the focus of any final rule should be only on Prime money market funds, exerting all municipal money market funds. BlackRock also suggests that 10 basis point rounding should be used by floating NAV money market funds and that the definition of retail funds requires a redefinition.
] wrote a letter in a series of letters, which suggests an alternative to the reform proposal, which would require a prime or tax exempt money market fund to implement a 2 percent liquidity fee if, at the of the business day, the money market fund's weekly liquid assets were less than 15 percent of its total assets, unless the fund's board of directors finds that imposing the fee is not in the best interest of the fund.
The alternative would also give the board the choice to impose a lower liquidity fee or suspend redemptions for a period that wouldn't exceed 30 calendar days, if it concludes either action is in the fund's best interest, wrote Federated's John McGonigle
, vice chairman.
Federated also said shareholders and "scores of intermediaries" believe a case has not been made for a significant reform of money funds, appreciate the risk of losing cash in rare situations but will not risk routine fluctuations, even small ones and are concerned about losing daily access to the full amount of their cash.
] wrote to the SEC criticizing its estimation that only 30 percent of all assets would be subject to the floating NAV if the proposal were adopted, wiring that it would be closer to 65 percent, Reuters
] also wrote a letter
to the SEC last week, suggesting several changes to the proposal, including letting municipal money market funds out of the floating NAV rule, as many other firm companies have suggested.
The Mutual Fund Directors Forum
also wrote a letter to the SEC, saying it should adopt a proposal that would allow funds to decide whether it adopts a floating NAV or allows the charging of liquidity fees and the potential use of gates when the liquid part of a fund portfolio falls below a certain percentage.
The U.S. Chamber of Commerce
submitted a letter to the SEC as well after organizing letters
from several business organizations and mayors last week.
The letter states that the Chamber of Commerce opposes a floating NAV because it would get rid of what President and CEO David Hirchmann
calls the main reason why corporate treasurers invest--stability and liquidity and the NAV would impose operational complexity and extra costs. Hirschmann also writes that he would support enhanced disclosures and that although he doesn't see a need for liquidity fees and gates, if the mechanisms were properly structured, they could have merit.
, assistant treasurer with Great Plains Energy
, will testify on the U.S. Chamber's behalf today.
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