Canada Proposes New Money Funds Rules

The Canadian Securities Administrators proposed new regulations to align Canadian money market funds (MMFs) more closely with the SEC's recently updated Rule 2a-7. The goal of the proposed changes is to improve the liquidity and credit quality of Canadian MMFs. Canadian MMFs suffered greatly in August 2007 when that nation's non-bank asset-backed commercial paper collapsed.

Under the proposed changes to National Instrument 81-102 Mutual Funds, Canadian MMFs would be required to maintain a weighted-average life (WAL) of 120 days or less, and hold 5 percent of assets under management in overnight investments and 15 percent in less than seven-day investments. Contrary to the new 2a-7 requirements, the CSA’s proposal would not change portfolio diversification or weighted-average maturity requirements, nor does it require MMFs to perform periodic stress testing.

See the entire proposal.

See AFP Money Market Fund Resources: www.afponline.org/moneyfunds.