Visit this page regularly for the latest updates on money market fund reform.
Fees and gates: A tool intended to protect money market fund shareholders
Money market fund boards of directors (boards) will have the discretion to impose liquidity fees and redemption gates (temporary suspensions of redemptions) on prime and tax-exempt money market funds
beginning October 14, 2016. This new rule is part of the latest effort by the U.S. Securities and Exchange Commission (SEC) to strengthen money market funds. Specifically, fees and gates are designed to
reduce the incentive for shareholders to sell ahead of other shareholders in a liquidity crisis and to give money market fund boards more tools to use in the case of a future crisis.
Wells Fargo announces effective dates for changes to certain money market funds
In May 2015, Wells Fargo Funds announced its plan to restructure its money market fund lineup in response to the new U.S. Securities and Exchange Commission (SEC) regulations that take effect in October 2016. The Wells Fargo Funds Board of Trustees has now approved the restructuring and related effective dates, and this product alert explains the upcoming changes.
Prime money market fund NAV volatility will likely remain low
Institutional prime money market funds will be required to transact at market-based, or floating, net asset values (NAVs) as of October 14, 2016. This is one of the Securities and Exchange Commission’s (SEC’s) main rule changes taking effect in 2016, and it is intended to help prevent runs on money market funds by making it clear to shareholders that the value of these institutional money market funds may fluctuate. To help clients gauge the practical implications of this change, we share observations about how our prime funds have performed.
Enhanced stress tests for money market funds
As part of the new money market rules scheduled to take effect in 2016, the Securities and Exchange Commission (SEC) will require money market funds to conduct enhanced stress tests by April 2016. These stress tests will be more robust than the current requirements—which have been in place since 2010—because the SEC wants to not only further minimize the risk of runs but also reduce disparities in the quality and comprehensiveness of stress tests across money market funds.
Tax relief for floating-NAV money market funds
To reduce the burden of tax compliance, the U.S. Treasury and the IRS issued guidance that will simplify the tax accounting for floating-NAV money market funds (MMFs). This guidance applies to institutional money market
funds, both prime and tax exempt. Government and retail money market funds will not be affected because they will continue to transact at a stable $1.00 NAV.
SEC removes references to credit ratings from Rule 2a-7
On September 16, 2015, the Securities and Exchange Commission (SEC) approved amendments to Rule 2a-7 to remove references to credit ratings issued by Nationally Recognized Statistical Rating Organizations (NRSROs) and replace such references with a new standard of creditworthiness. Funds will be required to comply by October 14, 2016.
Wells Fargo Advantage Funds announces changes to money market fund lineup
Wells Fargo Advantage Funds today announced that its Board of Trustees preliminarily approved changes to its money market fund lineup to address the regulatory changes adopted by the U.S. Securities and Exchange Commission (SEC) in July 2014. These changes will become effective on or prior to October 14, 2016.
Upcoming money market fund regulations
The new amendments are the latest effort by the SEC since the 2008 financial crisis to “reduce the risk of runs in money market funds and provide important new tools that will help further protect investors and the financial system.” By implementing a floating NAV for institutional shareholders, the SEC aims to reduce the incentive for these shareholders to sell ahead of other shareholders in a crisis. Liquidity fees and redemption gates are designed to give money market fund boards more tools to use in the case of a future financial crisis. Finally, more in-depth disclosures, greater diversification, and enhanced stress-testing regulations are expected to also help avert potential systemic risk.
New rules for money market funds
The U.S. Securities and Exchange Commission (SEC) voted in July 2014 to approve amendments to Rule 2a-7 of the Investment Company Act of 1940, which governs money market funds. The major changes—floating net asset values (NAVs) for institutional prime and tax-exempt funds, liquidity fees, and redemption gates—will take effect in October 2016.
Perspective paper: Our money market funds compare favorably with the new rules - August 2014
When managing our money market funds, we seek to provide shareholders stability of principal and a high degree of liquidity. As we move toward implementation of the new rules required by the Securities and Exchange Commission (SEC), we believe our funds are prudently managed in a manner that reduces risks to shareholders and to the greater financial system—risks that the SEC intended to address with its recent amendments to money market fund regulations.
Overview of the SEC’s final amendments to money market fund regulations
On July 23, 2014, the U.S. Securities and Exchange Commission (SEC) voted to approve amendments to Rule 2a-7 of the Investment Company Act of 1940, which governs money market funds. While the changes to Rule 2a-7 were announced this week, it is important to note that the SEC has allowed for the implementation of these changes to take place over a two-year period with final implementation required by late 2016.
Joint industry letter to the SEC on money market reform proposed rule
Wells Fargo Funds Managment, LLC, in conjunction with other money market fund industry firms, provided comments to the Securities and Exchange Commission on proposals for money market mutual fund reform. Each firm had previously submitted comments on the proposed rules. The joint letter discusses the exemption for retail money market mutual funds in the proposed rules, and collectively proposes an alternative definition for retail money market mutual funds.
Our response to the June 2013 SEC proposal
Wells Fargo Funds Management, LLC, submitted a comment letter in response to the SEC's proposal for further money market fund regulations, which focused on requiring prime institutional money market funds to transact at a floating NAV and permitting the use of liquidity fees and redemption gates in times of stress. A summary of our position and recommendations can be found here.
Overview of the SEC's recommendations regarding money market fund regulations
Yesterday, the SEC voted unanimously to issue a proposal for additional changes to money market mutual fund regulation. At this time, no rules or regulations regarding money market funds are changing. This vote represents the beginning of what is typically a lengthy process that includes a mandated period for public comment. The proposal includes two alternative reforms, which could be adopted separately or in combination.
Update on SEC's status regarding money market fund regulations
The SEC announced that it will hold an open meeting on Wednesday, June 5, when they will consider a recommendation to propose additional regulations to govern money market mutual funds. This announcement signals that the commission is likely to propose further regulatory changes. At this time, however, no rules or regulations regarding money market funds are changing.
The state of money market fund reform
As you are undoubtedly well aware, money market fund reform continues to be a hot topic. It is difficult to pick up a newspaper these days without reading about the Securities and Exchange Commission's (SEC's) quest for additional changes to money market funds.
Money market reform update: Compliance
The Wells Fargo Advantage Money Market Funds are in compliance with all transaction processing changes required by amended Rule 2a-7, effective October 31, 2011.
Response to SEC proposal to remove credit ratings
On April 25, 2011, Wells Fargo Funds Management, LLC, submitted a comment letter to the Securities and Exchange Commission (SEC) providing comments on the proposal to remove references to credit ratings.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Wells Fargo Money Market Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.