AFP Opposes Floating NAV in New Comment Letter to SEC

By Staff Writers
Published: 2012-04-05

In a comment letter to U.S. Securities and Exchange Commission Chairman Mary Schapiro sent April 4, the Association for Financial Professionals said it opposed eliminating the stable net asset value (NAV) in favor of a floating NAV. Although the SEC has yet to issue a formal proposal, Schapiro has said that the agency is considering the floating NAV as one way to reform money market funds (MMFs). AFP's preemptive comment is an indication of its membership's strong opposition to the concept.

Switching from a stable to a floating NAV "would greatly reduce investors' interest in utilizing MMFs as a cash management and investment tool, whether applied to all investors or just institutional investors," the AFP letter states. "Should regulators eliminate the stable NAV on MMFs, some corporate investors will be forced to walk away due to mandatory investment guidelines that require a stable per-share value. The resulting reduction in MMF balances would reduce the capital available to purchase commercial paper, making short-term financing for these businesses less efficient and more costly."

Read the full AFP comment letter here.

The AFP comment letter was co-signed by:

Benefit Resource, Inc.
Blue Cross Blue Shield of Massachusetts
CacheMatrix
Catholic Health Initiatives
California ISO
CareSource
Centerline Capital Group
Crawford & Company
Grass Valley USA LLC
Miami-Dade County Public Schools
Solix, Inc.
University of Colorado - Treasurer's Office
WellCare Health Plans, Inc.

Corporate Treasurers Wary of Floating NAVCorporate treasurers are highly skeptical about the merits of money-market funds switching to a floating net asset value. The general consensus among attendees at a recent roundtable was that Rule 2a-7 appears headed for an overhaul that is likely to include a floating NAV.
Treasurers Take Note: FSOC Refining FocusThe FSOC unanimously approved its third annual report recently, underscoring several systemic threats facing the financial system of interest to treasurers, including market runs, cyberattack vulnerabilities, interest-rate reform and overreliance on intraday credit extensions.
Ex-FDIC Chair Sheila Bair: Floating NAV is ‘the Best Thing’How does ex-FDIC Chair Sheila Bair think money-market mutual funds should be restructured, and why? A keynote speaker at the upcoming 2013 AFP Annual Conference, Bair didn't mince words when asked.
SEC Commissioner Hints at Money Market Fund Proposal NearIn a recent interview SEC Commissioner Daniel Gallagher said he expects new rules governing money-market mutual funds to be proposed within two months. The proposal would include a floating NAV, Gallagher said.
Former SEC Officials Differ on MMF ReformsLast week, former officials of the Securities and Exchange Commission sent a letter to the Financial Stability Oversight Council (FSOC), urging it to stop pressuring the SEC to enforce tighter regulations on money-market funds. However, another former SEC chairman believes that the FSOC has no choice but to intervene.

AFP Opposes Floating NAV in New Comment Letter to SEC

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