SEC Staff Provides Additional Guidance Regarding Money Market Fund Reform

On October 5, 2010, the staff of the SEC’s Division of Investment Management (the “Staff”) updated its FAQs concerning amendments to Rule 2a-7 under the Investment Company Act of 1940, as amended (the “1940 Act”), and other rules and forms relating to money market funds that were adopted by the SEC earlier this year.  Those amendments were discussed in the March 5, 2010 Alert, and the Staff’s previous set of responses to questions regarding the amendments were discussed in the June 1, 2010 Alert.  Below is a summary of the additional responses recently added by the Staff to Staff Responses to Questions About Money Market Fund Reform and Staff Responses to Questions about Rule 30b1-7 and Form N-MFP.  (Capitalized terms not otherwise defined have the meaning given to them in Rule 2a-7)

Website Posting Requirements. The Staff provided additional guidance regarding the website posting requirement in Rule 2a-7(c)(12).

  • The Staff previously indicated that a money market fund must provide on its website a link to each of its Forms N‑MFP filed during the previous twelve months, not just a link to the SEC’s website or to the page on the SEC’s website that allows a user to search for a company’s filings.  In the new responses, the Staff further clarified that a money market fund can satisfy this requirement by “creating a link to a fund specific web page on the SEC website that contains links to (at least) each of the fund’s most recent 12 monthly Form N-MFP filings.”  A money market fund may link to its EDGAR section of the SEC website and limit the results to Form N-MFP filings using the restrictions available on the website.  The fund should not limit the date range in its search.  (See Question V.C.2.)
  • A “private” money market fund (one that is not registered under the 1940 Act) that undertakes to comply with Rule 2a-7 in order to permit investments in the fund by registered investment companies in excess of limitations set forth in Section 12(d) of the 1940 Act will not be deemed to violate prohibitions on general solicitation and advertising of the Securities Act of 1933, as amended (the “1933 Act”), by posting information on its website in compliance with Rule 2a-7.  The purposes of the posting must be to permit registered investment companies to invest in the private money market fund in reliance on Rule 12d1-1 under the 1940 in excess of Section 12(d) limits.  The information posted must be limited to that required by Rule 2a-7, and the private money market fund may not use its website to sell securities or for general solicitation or advertising purposes.  (See Question V.F.1.)
  • Similarly, a money market fund that is registered only under the 1940 Act and sells its securities without registering them under the 1933 Act in reliance on Rule 506 of Regulation D thereunder and/or Section 4(2) of the 1933 Act will not be deemed to violate prohibitions on general solicitation and advertising information by posting information on its website in compliance with Rule 2a-7.  The information posted must be limited to that required by Rule 2a-7, and the “1940 Act only” fund may not use its website to sell securities or in a manner that conditions the market for the sale of its securities.  (See Question V.G.1)

Form N-MFP. The Staff provided further guidance on responding to questions about a money market fund’s holdings in repurchase agreements under Item 32 of Form N-MFP.  The Staff also provided new responses clarifying that a money market fund need not respond to certain items of Form N-MFP pertaining to designated NRSROs; these responses are consistent with the Staff’s position (discussed in the August 24, 2010 Alert) that pending its review of the use of NRSRO ratings in Rule 2a-7 conducted pursuant to Section 939A of the Dodd-Frank Wall Street Reform Act, a money market fund’s board need not designate NRSROs as otherwise required under amended Rule 2a-7.

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