The SEC Financial Stability Oversight Council (FSOC) recently issued a guidance update on counterparty risk management practices for Tri-Party Repurchase Agreements. The update “provides the Staff’s views on the types of legal and operational considerations that a MMF and its investment advisor should consider if a counterparty fails and defaults on its obligations under a Tri-Party Repo.” The update stresses the importance of advance planning in case of default. Read the rest of this entry »
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[Editor’s Note: The following post is authored by Davis Polk & Wardwell LLP]
On June 5, 2013, the Securities and Exchange Commission (the “SEC”) proposed amendments to rules under the Investment Company Act of 1940 (the “Investment Company Act”) and related requirements that govern money market funds (“MMFs”). The SEC’s proposal is the latest action taken by U.S. regulators as part of the ongoing debate about systemic risks posed by MMFs and the extent to which previous reform efforts have addressed these concerns. Read the rest of this entry »
Live Blogging at the Dodd-Frank Symposium: Systemic Risks, as well as Benefits, of Money Market Funds
(click here to see the full abstract of Mr. Mark Perlow’s presentation at the Symposium) The financial crisis demonstrated clearly that money market funds present certain systemic risks when they “break the buck.” Before the crisis there were already a number of regulations in place for money market funds, on matters such the ratings of investments that money market funds can invest in, disclosure of investments, and net asset value per share ratios (among others). In response to the financial crisis, new regulations have been passed or are being proposed to mitigate the risks of runs on these funds in the future. Mr. Perlow notes that money market funds provide a socially useful alternative to the banking system (particularly for certain, essential financing purposes and maturity transformation in the market) which may warrant caution in future regulation.