REGULATORY CHANGES FOR MONEY MARKET FUNDS

Posted on February 25, 2010 by Grant Stephenson

On February 23, 2010, the Securities and Exchange Commission began what may become radical revisions to the regulation of money market funds when it adopted a number of significant changes to its rules governing money market funds.  The changes were accompanied by a statement from the SEC chairman that indicated more regulatory change is on the way. SEC Release No. IC-29132 (Feb. 23, 2010) is online here: http://www.sec.gov/rules/final/2010/ic-29132.pdf .

 

The new rules are generally intended to increase investor protections by increasing regulatory oversight of money market funds.  For example, among other things, the new rules establish:

  • liquidity requirements for money market funds (a daily cash or equivalent requirement of 10 per cent);
  • a new restriction on the ability of funds to acquire illiquid securities;
  • shorter maturity limits for securities held by money market funds;
  • “know your investor” procedures requiring funds to hold liquid securities to meet foreseeable redemptions;
  • a requirement for periodic stress testing to assess ability of a fund to maintain a stable net asset value upon the occurrence of events such as a sudden increase in interest rates; and
  • new disclosure requirements including a monthly report of holdings to the Commission and a monthly posting of holdings online.

In many of these areas there previously was little or no regulation.  The rules are effective May 5, 2010, but a number of the new requirements are phased in over two years, including a new requirement that funds be able, as a matter of processing capability, to process transactions at prices other than a stable net asset value.

 

SEC Chairman Mary Schapiro’s statement on the new rules is online here: http://www.sec.gov/news/speech/2010/spch012710mls-mmf.htm 

Ms. Schapiro’s remarks indicate that the SEC is continuing to study the possibility of floating net asset value money market funds, among other changes.  She indicated the market place should expect further changes when she characterized the current regulatory changes as “important initial steps toward making money market funds less vulnerable to ‘runs’.” (Italics supplied.)  One further change under study is the establishment of a private liquidity facility for money market funds in times of stress.

 

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Ohio WARN Legislation Proposed

Posted on February 8, 2010 by Franck Wobst

Ohio employers will want to pay close attention to H.B. 434, which was proposed by House Representative Kenny Yuko, D-Richmond Heights, last week. The Bill is similar in nature to the Worker Adjustment and Retraining Notification Act ( “WARN”), but goes further than the federal law in several respects. For example, the Bill would require an employer in Ohio laying off 25 or more employees in any 30-day period to give at least 90-days’ advance written notice of the layoff to affected employees, local workforce policy boards, and certain state departments and local elected officials. The notice period would be expanded to 120 days for employers planning to lay off 250 or more employees. Also, the penalties for violations include double back pay for all affected employees, as well as the full value of their employee benefits.

The Bill does contain exceptions similar to those found in WARN, including exceptions for temporary facilities, layoffs arising from “circumstances that were not reasonably foreseeable,” caused by “physical calamity, natural disaster, or act of war,” or where the employer can show that "notice would have blocked incoming capital which might have prevented the layoff.” 

H.B. 434 is still in the very early stages of the legislative process. However, because it would expand employer advance notice obligations in several respects beyond WARN’s requirements, it bears watching – and perhaps warrants a call to your State representative.  You can stay updated on H.B. 434 by subscribing to www.employerlawreport.com, a blog on employment related matters from Porter Wright Morris & Arthur.

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