Money Market Resource Center - Association for Financial Professionals

Questions about the SEC's new rule?

Contact Brian Kalish, AFP's Finance Lead

AFP Market Data

AFP Money Market Resource Center

Following the U.S. Securities and Exchange Commission’s (SEC) efforts to reform rules governing money market mutual funds, AFP has expressed concerns regarding proposals to eliminate the stable NAV in favor of a floating NAV. We believe it would greatly reduce investors’ interest in utilizing MMFs as a cash management and investment tool, whether they be retail or institutional investors. For purchasers of MMFs, the return of principal is a much greater driver of the investment decision than return on principal. For a large number of institutional investors, the potential of principal loss would preclude floating NAV MMFs from being an internally approved investment alternative.

In response to the issued proposals by the SEC, AFP has submitted comment letters that account for all circumstances, including the role that liquidity of MMFs played in exacerbating the financial crisis. We believe that the rules enacted in 2010 were significant reforms that address liquidity concerns and systemic risks posed by MMFs. AFP argued that the SEC should allow the rules to serve their intended purpose before instituting further proposals, such as floating the NAV, which compromises MMFs as a viable investment alternative for corporate investors.

AFP also signed onto a joint letter with the U.S. Chamber of Commerce and a number of U.S. companies to the SEC highlighting our opposition to the idea of moving to a floating NAV. The letter cited the potential adverse impact on companies’ ability to raise capital in the U.S. by issuing commercial paper, as well the expected resulting flight of investors from these funds.

Recently, AFP reported that the SEC was expected to release additional rules and guidance on money market funds early in 2012. According to a Wall Street Journal report published Tuesday, February 7, a two-part proposal is soon to be introduced.

If you would like to add your organization’s name to future efforts, please contact AFP’s Director of Government Relations & Public Policy Jeanine Arnett at jarnett@AFPonline.org.

The U.S. Chamber of Commerce has organized a comprehensive campaign to ensure that the SEC’s proposed rule to reform money market mutual funds does not adversely impact organizations’ ability to manage and raise the capital necessary to drive job creation and economic growth. Click here to learn more about the Chamber’s efforts.

The Investment Company Institute (ICI) has also launched a website dedicated to advocating again additional SEC reforms. Click here to learn more about their efforts.