The staff of the Securities and Exchange Commission (the “Staff”) recently issued a no-action letter to College Retirement Equities Fund (“CREF”)1 allowing a money market account portfolio (the “Fund”)2 to use the amortized cost method to value its portfolio securities despite the Fund not maintaining a constant share price.3 CREF sought the relief because Rule 2a-7 under the Investment Company Act of 1940 (the “1940 Act”) could be read to require maintenance of a fixed share price as a condition to using the amortized cost method. For example, Rule 2a-7(c)(1) conditions a fund’s use of the amortized cost method on a finding by the fund’s board that “it is in the best interests of the fund and its shareholders to maintain a stable net asset value per share or stable price per share.” 4

CREF maintained that there was no fundamental policy reason that a money market fund should be required to maintain a constant share price in order to take advantage of the amortized cost method. In granting the requested relief, the Staff accorded weight to the following key representations by CREF: (i) the Fund’s board of directors would determine that it is in the best interests of the Fund and its investors to provide additional stability in the Fund’s price per share by using the amortized cost method and complying with the other requirements of Rule 2a-7 (other than maintaining a constant share price); (ii) the Fund’s board of directors would adopt written procedures reasonably designed to maintain stability in the Fund’s price per share;5 and (iii) the Fund’s prospectus would clearly indicate that the Fund does not maintain a constant value per share and that the Fund’s share value will fluctuate. The Staff suggested that, consistent with the purposes of Rule 2a-7, the foregoing procedures should provide investors with sufficient protection against dilution (despite the lack of a commitment to maintain a constant share price).

The CREF no-action letter is available at