The SEC has issued guidance on two issues related to Rule 2a-7, which was amended in February as part of the agency’s money market fund reform initiative. Under the rule, a money market fund may not maintain a dollarweighted average portfolio maturity that exceeds 60 days. In a no-action letter, the SEC staff stated that for purposes of calculating the weighted average portfolio maturity, a money market fund may treat a short-term floating rate security that is subject to an unconditional demand feature as having a maturity equal to the period remaining until the principal can be recovered through demand.

Rule 2a-7, as amended, also requires the board of a money market fund to designate, by December 31, 2010, at least four nationally recognized statistical rating organizations (NRSROs) whose ratings the fund would use to determine the eligibility of portfolio securities under the rule. However, in light of Section 939A of the Dodd-Frank Act – enacted after Rule 2a-7 was amended – which requires the SEC to remove from its regulations all references to credit rating agencies and substitute a standard of creditworthiness the SEC deems appropriate, the SEC issued no-action guidance stating that it would not recommend enforcement action if a money market fund board does not comply with the NRSRO requirements before the SEC has modified Rule 2a-7 as required by Dodd-Frank.

Although most of the compliance dates for the money market fund reforms have passed, two still remain. By December 7, 2010, all money market funds must begin filing information on Form N-MFP pursuant to Rule 30b1-7, and by October 31, 2011, funds must be able to process transactions at prices other than stable net asset value. Additional guidance related to Rule 30b-7 and Form N-MFP, as well as other aspects of the of money market fund reforms, can be found on the SEC website in the form of “Staff Responses to Questions” regarding these matters.