The Securities and Exchange Commission (SEC) has recently announced significant amendments to the rules governing money market funds under the Investment Company Act of 1940. These reforms aim to bolster the stability and resilience of money market funds, protecting investors during periods of market stress.

Enhanced Liquidity Requirements:

One of the key changes introduced by the SEC is the increase in minimum liquidity requirements for money market funds. This adjustment ensures that funds maintain substantial liquidity to withstand rapid redemptions. The amendments also eliminate provisions that allow funds to temporarily suspend redemptions, replacing them with the option to impose liquidity fees if a fund’s weekly liquid assets fall below a certain threshold. These measures are designed to mitigate the risk of investor runs on money market funds during times of market volatility.

Protecting Investors and Allocating Costs Fairly:

To address concerns surrounding redemption costs and liquidity, the amendments require institutional prime and institutional tax-exempt money market funds to impose liquidity fees when the fund experiences significant daily net redemptions. This requirement helps protect remaining shareholders from dilution and ensures that redeeming shareholders bear the costs associated with redeeming from the fund during periods of costly liquidity. Additionally, any non-government money market fund will have the option to impose a discretionary liquidity fee if the fund’s board deems it to be in the best interest of the fund. These measures help safeguard investor interests.

Liquidity is a hot topic right now and Hazeltree’s active treasury management technology offers solutions our customers need to maintain a transparent view of cash, money market funds and other liquid assets. What’s more, Hazeltree Liquidity Investment Platform™ makes it easy for our customers to automate investments to a wide spectrum of money market funds to meet their specific liquidity requirements. For more information, go to https://hazeltree.com/product/hazeltree-liquidity-investment-platform/.

An investment in a Money Market Fund is not a Deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.