What is Rule 2a7?
What is Rule 2a7?
From a maturity perspective, Rule 2a-7 stated that the average dollar-weighted portfolio maturity of investments held in a money market fund cannot exceed 60 days. From a credit rating perspective, no more than 3% of assets can be invested in securities that do not fall within the first or second-highest ranking tier.
When was money market reform?
What’s behind the SEC rules The move for money market fund reform grew out of the 2007–2008 financial crisis. The Reserve Primary Fund, which invested in Lehman Brothers debt, “broke the buck,” meaning its net asset value (NAV) dropped below $1 per share.
Can you lose principal in a money market fund?
A money market fund is a type of fixed-income mutual fund that invests in debt securities with short maturities and minimum credit risks. As such, it is considered one of the least volatile assets on the market. In money market funds, investors lose principal when a share’s net asset value falls below $1.00.
Are money market funds Open end funds?
A money market fund (also called a money market mutual fund) is an open-ended mutual fund that invests in short-term debt securities such as US Treasury bills and commercial paper.
Who regulates money market mutual funds?
The Reserve Bank of India regulates three categories of financial markets; money markets, government securities markets and foreign exchange markets. Mutual Funds have a presence in the first two and the Reserve Bank is therefore interested in the role that they play in developing them.
Are money market funds safe in a crash?
Both money market accounts and money market funds are relatively safe. Banks use money from MMAs to invest in stable, short-term, low-risk securities that are very liquid. Money market funds invest in relatively safe vehicles that mature in a short period of time, usually within 13 months.
What are open-ended schemes?
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis.
What are examples of closed-end funds?
Closed-end funds are more likely than open-end funds to include alternative investments in their portfolios such as futures, derivatives, or foreign currency. Examples of closed-end funds include municipal bond funds. These funds try to minimize risk, and invest in local and state government debt.
What changes have been made to the money market rules?
In response to the 2007-2008 financial crisis, the Commission adopted a first series of amendments to its rules on money market funds in 2010 that were designed to make money market funds more resilient by reducing the interest rate, credit, and liquidity risks of their portfolios.
What are the new rules for Prime money market funds?
The new rules require a floating net asset value (NAV) for institutional prime money market funds, which allows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets and provide non-government money market fund boards new tools – liquidity fees and redemption gates – to address runs.
What would the money market fund reforms mean for investors?
The money market fund reforms would: ·Require certain money market funds to maintain a floating net asset value (NAV) for sales and redemptions based on the current market value of the securities in their portfolios rounded to the fourth decimal place ( e.g., $1.0000).
Does Money market fund regulation improve resiliency?
Although these reforms improved money market fund resiliency, the Commission said at the time that it would continue to consider whether further, more fundamental changes to money market fund regulation might be warranted.
