One June 5, 2013, the SEC proposed amendments impacting money market funds and money market type funds. This is Part IV of a Four-Part Blog on the 671-page proposal delineated in the following compliance areas: (ia) changes the net asset value per share (“NAV”) from fixed-rate to floating-rate for certain money market funds; (ib) authorizes money market funds to suspend redemptions or impose liquidity fees during heavy redemption periods. These proposed rule changes are “designed to address money market funds’ susceptibility to heavy redemptions, improve their ability to manage and mitigate potential contagion from such redemptions, and increase the transparency of their risks, while preserving, as much as possible, the benefits of money market funds.” Under this proposal, the SEC continued that they could adopt either alternative by itself or a combination of the two alternatives.;” (ii) additional disclosures, including new Form N-CR and Form N-MFP; (iii) portfolio diversification and stress testing of money market funds holdings; (iv) additional disclosure on Form PF of money market type funds held by private equity firms.
The SEC proposed to amend the Form PF section where private equity advisers report information regarding the private funds. Specifically, “liquidity funds,” which are private funds that seek to maintain a stable NAV (or minimize fluctuations in their NAVs) and thus can resemble money market funds. For purposes of Form PF, a “liquidity fund” is any private fund that seeks to generate income by investing in a portfolio of short term obligations in order to maintain a stable net asset value per unit or minimize principal volatility for investors.
Large liquidity fund advisers, which are registered advisers with $1 billion or more in combined money market fund and liquidity fund assets, would file substantially the same information with respect to their liquidity funds’ portfolio holdings on Form PF as money market funds are required to file on Form N-MFP. In addition, provide information about any securities sold by their liquidity funds during the reporting period, including sale and purchase prices. Finally, large liquidity fund advisers would identify any money market fund advised by the adviser or its related persons that pursues substantially the same investment objective and strategy and invests side by side in substantially the same positions as a liquidity fund the adviser reports on Form PF.
Also, it was proposed to remove current Questions 56 and 57 on Form PF because these questions generally require large liquidity fund advisers to provide information about their liquidity funds’ portfolio holdings broken out by asset class (rather than security by security). And regulators would be able to derive the information currently reported in response to those questions from the new portfolio holdings information advisers would provide.