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SEC adopts rule requiring money market funds to report portfolio holdings

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The Securities and Exchange Commission is adopting an interim final temporary rule under the Investment Company Act of 1940 to require a money market fund to report its portfolio holdings and valuation information to the SEC under certain circumstances. 

The new reporting requirement is designed to provide information substantially similar to that submitted by certain money market funds under the Temporary Guarantee Program for Money Market Funds established by the Department of the Treasury, which will expire on 18 September 2009.

Since October 2008, most money market funds have participated in the guarantee programme, which has guaranteed the USD1.00 share value of accounts held by investors as of 19 September 2008 in participating money market funds. The programme was established to help stabilise money market funds following a period of substantial redemptions that threatened the ability of some money market funds to maintain the USD1.00 share value.

Money market funds participating in the programme have been required, in certain circumstances, to submit their portfolio schedules and related information each week to the Treasury Department and the SEC. The SEC says these reports very useful in monitoring money market funds, and believes that continuing to receive this information will further our mission to protect investors. When the programme expires, however, money market funds will no longer be required to submit such portfolio information, and the SEC will not receive current information about money market fund holdings.

In June 2009, the commission proposed new rules and rule amendments to reform the regulation of money market funds.  The proposal included a new rule and a new form N-MFP, on which money market funds would report to the commission detailed information about their portfolio holdings, which it would use to monitor the funds. The SEC proposed to require that all money market funds submit more detailed information than it currently receives under the guarantee programme, and proposed that the information be filed in a format that would permit it to create a searchable database of money market fund information.

Of the approximately 40 commentators who addressed the proposals to require the reporting of portfolio holdings to the commission, 33 generally supported such reporting. Some commenters, however, expressed concerns about the specific information required, the timing of the disclosure, and the SEC’s intent to make the information publicly available.

The commission will continue to review these comment letters, but in the meantime it is adopting an interim final temporary rule, rule 30b1-6T, that requires the reporting of basic securities portfolio information to the commission in certain limited circumstances. 

As was the case under the guarantee programme, only a money market fund with market-based net asset value per share below USD.9975 must report information under the rule. Such a fund must notify the commission by electronic mail and provide a portfolio schedule to the commission promptly, but in no event later than the next business day. Subsequently, the fund must report its portfolio schedule as of the last business day of the week, and submit it no later than the second day of the following week, until the fund’s market-based NAV at the end of the week is USD.9975 or greater.

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