Quietly on late September 16, the Securities and Exchange Commission removed references to credit ratings from its money market fund regulations . The move was part of an effort to reduce the money fund industry’s reliance on credit-rating agencies after their poor performance leading up to, and during, the 2008-09 financial crisis.
The SEC board unanimously voted to eliminate requirements that money funds invest solely in highest-rated debt securities like commercial paper and repurchase agreements. Once the new rule takes effect in October, funds can only buy securities they determine present “minimal credit risks.” The rule change was required by the 2010 Dodd-Frank Act.
“Reducing reliance on credit ratings to determine which securities money market funds can hold is an important part of our efforts related to these funds,” SEC Chairman Mary Jo White said in a written statement.According to the Wall Street Journal, the SEC voted on the changes via “seriatim,” in which commissioners vote on a rule outside of a public meeting.