SIFMA Submits Comments to SEC on Removal of Ratings and Diversification Requirements for Money Market Funds

SIFMA submitted a comment letter to the SEC regarding proposed amended rules and forms relating to money market funds. The proposed amended rules eliminate references to ratings from Investment Company Act Rule 2a-7 ("Money Market Funds") and modify Form N-MFP.

SIFMA provided "six main comments" on the proposals:

• the SEC should revise the proposed definition of "eligible security" to eliminate the new phrase "which determination [of minimal credit risks] must include a finding that the security's issuer has an exceptionally strong capacity to meet its short-term financial obligations";
• the SEC should eliminate the cross-reference in the proposed rule to commentary in the proposed rule release on the definition of "eligible security," which conflicts with Section 939A of Dodd-Frank;
• the SEC should clarify the expected frequency of reviews under the proposed requirement that the adviser provide an ongoing review of whether each security (other than a government security) continues to present minimal credit risks;
• the SEC should reiterate in the adopting release that its commentary on minimal credit risk analysis provides a permissive, not mandatory, list of factors and is not intended as the exhaustive list of factors required in a minimal credit risk determination;
• the SEC should eliminate the requirement to report on Form N-MFP ratings assigned to each security; and
• the SEC should retain in Rule 2a-7 the exception from issuer diversification testing for securities with a guarantee from a non-controlled person of the issuer.

See: SIFMA Comment Letter. Related news: SEC Re-Proposes to Remove Certain References to Credit Ratings and Amend Issuer Diversification Provisions (August 14, 2014).