September 9, 2013
Elizabeth M. Murphy
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Dear Elizabeth Murphy:
While it must seem like the best idea to you SEC folks ,et al, that changing to a variable price per unit MMF structure would be best, perhaps because it seems more "honest" and "transparent", this is NOT the case.
Changing from the $1.00 per share pricing will make our entire system UNSTABLE. It will scare the pants off conservative investors (which is everybody), liquid investors, etc. If you want to fix this system, just make the firms report properly and conduct themselves ethically , but still use the $1.00 nav pricing version. I remember what happened when MM shares went below $1.00 during the 1987 market drop: most investors never knew it even happened because it was brief, but every advisor and firm felt a HUGE shudder of fear for our safe investors and what that would mean to confidence in our financial system . THIS is not the time to be
messing with the MMF system in this way. No one will benefit from
losing the $1.00/NAV unit pricing except the committees who thought this
up as a way to "fix" something. Fix it in a way that doesn't involve
blowing up what little trust there is currently.! Investors will NOT understand the pricing change thing, they'll just see their "safe "
parking place for money go up and down and not be safe anymore and all explanations will sound like double talk- again. The public fallout from changing to a variable mmf nav will be so enormous, you must just not be able to visualize the impact this would have on our entire financial
system. Thank you for doing the right thing in this matter, that's best
for everyone, especially people who don't know what's going on, which is MOST investors. Never mistake ignorance for complicity by our dear investing public. They aren't stupid, they just want to focus on other things in their lives, like their kids, grandkids, their education, jobs,
etc. They should be able to do that without having to worry over their
money market fund accounts... we all have so many other things to concern
ourselves with. Leave the NAV at $1.00! Thank you
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.
Sincerely,
Nadine Refsell