Subject: File No. S7-03-13
From: Kathryn L. Hewitt, CPA
Affiliation: Treasurer, Harford County, Maryland

September 17, 2013

As the Treasurer of a large county in Maryland and an active GFOA member, I have grave concerns over the proposed regulation of Money Market Mutual Funds. Specifically, the area of greatest concern is the proposed floating Net Asset Value. This significantly affects the institutional cash/investment manager from using these funds for daily cash management purposes. In addition, it will potentially move the local government investor into risker investments in lower credit quality institutions with less liquidity and flexibility. It may cause a concentration of investments in local banks or brokerages which reduces diversification in our short-term portfolios and in turn increases risk in our portfolios of tax-payer money. The changes to a floating NAV will also be expensive for system changes to track and value our portfolios. This will also affect the Local Government Investment Pools which operate "like" Rule 2a-7 funds. These LGIPs have been a valuable investment option for state and local governments to pool our investible dollars together and hire professional expertise to invest those dollars. The change to a floating NAV is also a problem for us in following the Government Accounting Standards Board (GASB) rules in disclosing, reporting and valuing our investment portfolios.

A second area of concern is the treatment of tax-exempt money market mutual funds differently than the U. S. Government money market mutual funds by proposing that they have a floating NAV. Tax-exempt MMFs are the largest purchaser of short-term municipal debt securities. These debt securities assist in financing local infrastructure at a low cost because of their tax-exempt status. If these proposals decrease the investor pool for these securities, it will increase costs for infrastructure across the country. It does not make sense to treat securities issued by the federal government and the agencies differently than the securities issued by our state and local governments. Funds investing in all of these security types should have similar treatment in the SEC rules. The taxpayers are the source of funds for repayment of federal, state and local government debt.

The strengthening of the safety of money market funds in the SEC's 2010 regulatory changes are sufficient to protect the investors. Investors, especially institutional investors, are able to evaluate and understand their investment in money market mutual funds. These new proposals seem to hasten a potential run on a fund rather than protect against it with the floating NAV and the other proposals. Investors will exit the funds quicker with extremely small movements in NAV.

Please reconsider your proposals and the effect they will have on the state and local governments across the country.