The following Letter Type A, or variations thereof, was submitted by individuals or entities.
Letter Type A:
Elizabeth M. Murphy
Dear Elizabeth Murphy:
Since we have depended on the utility, stability and liquidity of money market funds (MMFs) for some time, we want to express our strong opposition to the imposition of a floating NAV as outlined in the SEC's proposed amendments to fund regulations. This action would destroy a fundamental reason why the funds have become the preferred cash management product for tens of millions of Americans. As importantly, a floating NAV would do nothing to help achieve the stated regulatory goal of averting significant redemptions during a time of extreme financial stress, a key point raised by Commissioner Paredes in his comments on the proposal.
The foundation for the popularity and usefulness for MMFs is the stable $1.00 net asset value and like the vast majority of users, we certainly understand that MMFs are investments that are not guaranteed by the government or anyone else. For us, adopting a floating NAV would create accounting, tax and administrative nightmares by, requiring the tracking of minute increases or decreases in share price each time shares are bought or sold. It is also critical that the SEC maintain the present system of same-day settlement.
The hard dollar costs, time, systems/processes and personnel resources needed with a floating NAV will make MMFs just too expensive and force users to seek less attractive or unregulated alternatives. And targeting just prime funds for a floating NAV is no solution as these funds are widely used, not only by institutions, but also by individual investors in 401(k) and other retirement holdings.
Since the SEC is serious about preserving MMFs and is also concerned about protecting investors from heavy redemptions should a crisis hit the financial markets, then liquidity gates, as discussed in Alternative Two, provides the only solution. Gating, a temporary restriction of redemptions, maintains a stable value and daily liquidity in all but the most extreme times, creates no tax, accounting or administrative issues and meets both investors and issuers needs. It does, however, allow for temporary redemption restrictions at the judgment of the fund board to gate the fund and protect all investors. Gating is a successfully tested response that makes sense and will preserve the benefits of money market funds.
We ask you to look closely at the serious and widespread fallout that would occur with a floating NAV, as well as how gating can address the needs of all MMF stakeholders. We hope that the SEC will take our views into consideration.
In light of the 2010 regulatory reforms instituted by the SEC, money market funds are working well. We urge the SEC not to regulate MMFs out of existence since there are no other financial products available that provide the same flexibility, yield and value as MMFs.