OCC Description of the Short-Term Investment Funds Final Rule

The Office of the Comptroller of the Currency (OCC) published a final rule in the Federal Register on October 9 that revises the requirements imposed on U.S. banks and federal branches of foreign banks pursuant to the short-term investment fund (STIF) rule. A STIF is a form of collective investment fund (CIF) that may be established and managed by a national bank (or a federal branch) under its fiduciary authority. Unlike other forms of CIFs, a STIF is valued based on the amortized cost of its assets rather than based on mark-to-market basis.The final rule adds safeguards designed to address the risk of loss to a STIF’s principal, including measures governing the nature of a STIF’s investments, ongoing monitoring of its mark-to-market value and forecasting of potential changes in its mark-to-market value under adverse market conditions, greater transparency and regulatory reporting about a STIF’s holdings, and procedures to protect fiduciary accounts from undue dilution of their participating interests in the event that the STIF loses the ability to maintain a stable net asset value (NAV).

The OCC notes that it will continue to evaluate the requirements of its STIF regulations in light of future policy assessments and initiatives concerning similar types of funds, such as money market mutual funds governed by Rule 2a-7 under the Investment Company Act, and will take additional actions as appropriate.

Effective Date: July 1, 2013.

See also: Yesterday's news item on IOSCO's recommendations as to the regulation of money market funds.