SURVEY ON SEC MMF REGULATORY REFORM COSTS AND CONSEQUENCES

INTRODUCTION

Money Market Funds supply the world with short-term credit, lending trillions of dollars to commerce and government at all levels. Credit supply is critically important to the stability, recovery and growth of domestic and global economies. For institutions of every kind – government agencies, corporate enterprises, nonprofit organizations, and financial institutions – Money Market Funds are the preferred vehicle for cash management because they efficiently and reliably deliver preservation of principle, liquidity, and a market rate of return. Since their inception, Money Market Funds’ growth and resiliency have been a testament to the power of their adaptable construct and core value.

Yet, Money Market Funds are facing a grave threat as government policymakers are considering sweeping regulatory action that will mandate additional capital buffers, principle redemption holdbacks and a conversion to a floating net asset value (NAV). ICD conducted the New SEC Regulatory Reform Survey to gauge the opinions and preferences of our corporate clients. ICD client reaction to these contemplated regulations were overwhelmingly negative on a reform-by-reform basis, but even more troubling is the anticipated reduction of client investment in Money Market Funds as a cash management intermediary – estimates suggest a staggering 41% institutional investment decline! Where would companies and municipalities go for short-term credit? What might happen to an economy that is continuing to struggle in its recovery and is vulnerable to credit dislocation?

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