SEC Approves Amendments to Rules Governing Money Market Funds

July 23, 2014

The U.S. Securities and Exchange Commission (“SEC”), by a vote of 3 to 2, approved amendments to Rule 2a-7 and other rules that govern money market funds under the Investment Company Act of 1940 (the “Amendments”). The Amendments generally combine the two alternatives set forth in the proposing release issued in 2013 (the “Proposal”) – (1) requiring institutional money market funds to operate with a floating net asset value (“NAV”), rounded to the fourth decimal place and (2) allowing the imposition of “liquidity fees” and “redemption gates.” In her opening remarks, SEC Chair White stated that the Amendments “fundamentally change the way most money market funds operate…will reduce the risk of runs in money market funds and provide important new tools that will help protect investors and the financial system in a crisis.”

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