US SEC Approves Amendments to Rules Governing Money Market Funds: Implications for Boards

September 29, 2014

The Securities and Exchange Commission has approved sweeping amendments to Rule 2a-7 under the Investment Company Act and other rules governing the operations of money market funds. The amendments generally combine the two alternatives set forth in the proposing release – (i) permitting (and under circumstances, requiring) certain money funds to impose a “liquidity fee” (up to 2%) and/or “redemption gate,” if weekly liquidity levels fall below the required regulatory threshold and (ii) requiring “institutional money funds” to operate with a floating net asset value rounded to the fourth decimal place. The amendments greatly impact the money fund industry and have significant implications for a money fund’s board of directors/trustees.

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