Federal Register - February 10, 2021
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Source: Federal Register
Federal Register / Vol. 86, No. 26 / Wednesday, February 10, 2021 / Notices
permitted these funds to maintain a stable NAV per share like all other MMFs.
In addition, to provide tools to slow an investor run should it occur, the 2014 reforms provided new fee and gate tools for all prime and tax-exempt MMFs, including retail funds.17 Under the fee and gate provisions, boards of these MMFs are permitted to impose liquidity redemption fees of up to 2
percent or to temporarily suspend redemptions if the funds WLA falls below the 30 percent minimum required. In addition, funds must impose a 1 percent liquidity fee if WLA
falls below 10 percent of total assets, unless the funds board determines that imposing the fee is not in the best interests of the fund. Liquidity fees provide investors continued access to cash redemptions but may reduce the
incentive to redeem. Gates, on the other hand, stop redemptions altogether for up to ten business days but may cause investors to seek a first mover advantage and redeem in advance of the imposition of gates.
Further, the 2014 amendments enhanced transparency for MMF
investors and provided information about important MMF events more uniformly and efficiently. For instance, the amendments required MMFs to promptly report certain significant events in filings with the SEC, including the imposition or removal of fees or gates, portfolio security defaults, the use of sponsor support, and a fall in a retail or government MMFs market-based price per share below $0.9975. The 2014
reforms also generally required website disclosure of these events, as well as daily website disclosure of a funds
DLA, WLA, market-based NAV, and net flows. In addition, the reforms addressed MMF diversification and valuation practices.
C. State of the Money Market Fund Industry Following the 2008 Financial Crisis Since 2008, the composition of the MMF sector has changed substantially, and the industry continued to evolve through 2020. Chart 1 provides information about changes in net assets by type of MMF, while Chart 2 provides more detail about subcategories of prime and tax-exempt MMFs i.e., retail and institutional funds. As of September 30, 2020, total industry net assets were $4.9
trillion, down slightly from an all-time high of $5.2 trillion in May 2020 see Chart 1.
BILLING CODE 801101P
17 Government MMFs are permitted but not required to adopt fee and gate provisions.
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