New Final Rules

Money Market Funds

On July 23rd, the SEC adopted amendments to its money market mutual fund rules. The amendments require a floating net asset value (“NAV”) for institutional prime money market funds and provide non-government money market fund boards with the ability to impose fees and redemption gates to address possible investor runs. The final rules also include enhanced diversification, disclosure and stress testing requirements, as well as updated reporting by money market funds and private funds that operate like money market funds. The final rules provide a two-year transition period. Concurrent with the adoption of the new rules, the SEC proposed exemptions from certain confirmation requirements for transactions effected in shares of floating NAV money market funds. Additionally, the SEC re-proposed amendment to the Commission’s money market fund rules and Form N-MFP to address provisions that reference credit ratings. The re-proposed amendments would implement section 939A of the Dodd-Frank Act, which requires the Commission to review its rules that use credit ratings as an assessment of credit-worthiness, and replace those credit-rating references with other appropriate standards.

The rule amendments will be effective 60 days after their publication in the Federal Register. Comments on the proposed exemptions should be submitted within 21 days after publication in the Federal Register and comments on the re-proposal should be submitted within 60 days after publication. SEC Press Release. To address the tax reporting and compliance issues which may result from the floating NAV requirement, the Treasury Department issued proposed new guidance that would allow money market fund investors to use a simplified tax accounting method for determining gains and losses, which will eliminate the need to track individual purchase and sale transactions for tax reporting purposes. It has also released a new revenue procedure that provides relief from the “wash sale” rules for any losses on shares of a floating NAV money market fund. Although the Treasury Department guidance is proposed and not final, shareholders in floating NAV money market funds can rely on these proposed regulations to begin using the simplified method. Treasury Department Press Release.

Other Developments

Cyber Preparedness

On July 22nd, Wall Street & Technologyreported the SEC is assessing whether the securities industry is prepared to meet possible cyber-security threats. The agency has issued guidance aimed at helping firms implement proper controls. Cyber Preparedness.

Staff Announcement

On July 21st, the SEC announced that Mark J. Flannery has been named its chief economist and director of its Division of Economic and Risk Analysis, which develops analysis for the SEC’s policymaking, rulemaking, enforcement, and examinations. SEC Press Release.