2023 SEC money market fund
reform overview
In July 2023, the Securities and Exchange Commission (SEC) finalized new reform amendments for money market funds (MMFs). We anticipate minimal impact to retail and government MMFs, while institutional prime and institutional tax-exempt MMFs will be subject to some new or adjusted requirements. A timeline is laid out below summarizing the SEC’s phased approach to when MMFs will need to comply with the new amendments.
What are the new regulations?
2024
2021
2022
2023
July 12, 2023:
SEC announced
finalized 2023
amendments
December 2021:
SEC proposed new regulations for MMFs and called for feedback
October 2, 2024:
MMFs must comply with fourth phase
of amendments
August 3, 2023:
New MMF reform
amendments published
in the Federal Register
April 2, 2024:
MMFs must comply
with second phase
of amendments
June 11, 2024:
Third phase of
amendments are
effective and MMFs
must comply with them
2022:
Market particpants,
including Federated Hermes,
wrote comment letters
and met with SEC staff
to discuss the proposal
October 2, 2023:
First, second and fourth
phases of amendments are
effective and MMFs must
comply with first phase
of amendments
Reform timeline
Removes MMFs’ ability to impose temporary gates to suspend redemptions
Removes the regulatory tie that permits MMFs to impose liquidity fees if weekly liquid assets (WLA) fall below a certain threshold
Impacted MMFs may handle a negative interest rate environment either by converting from a stable share price to a floating share price or by using the RDM to reduce the number of shares outstanding to maintain a stable net asset value per share, subject to certain board determinations and disclosures to investors
Effective 10/2/23, a fee is no longer linked to if weekly liquid assets fall below a specified threshold. Discretionary fees may only be imposed if the Board determines it would be in the best interests of the fund and cannot exceed 2% of the value of the shares redeemed
(The SEC specifically noted that funds may opt to comply with this rule prior to required compliance date)
MMFs must maintain at least 25% daily liquid assets (increased from 10%) and at least 50% weekly liquid assets (increased from 30%). Both requirements are ‘point of purchase’ requirements
Mandated weighted average maturity (WAM) and weighted average life (WAL) calculation methodology
Must report if the MMF has invested less than 25% of its total assets in weekly liquid assets or less than 12.5% of its total assets in daily liquid assets
Must report: additional information about the composition and concentration of MMF shareholders; Prime MMFs’ sales of non-maturing investments; The application of liquidity fees under the final rule; Reporting related to share cancellation for RDM
Updated reporting will largely mimic what is reported for 2a-7 MMFs on Form NMFP
A mandatory liquidity fee will be charged when an institutional prime or institutional tax-free money market fund experiences net redemptions in excess of 5% of the fund’s net assets, and the cost of liquidity (i.e., transaction costs and market impact costs ) is greater than .01% of the value of the total shares redeemed.
2023 Amendment
Compliance Date
Impacted MMFs
Description
10/2/23
10/2/23
10/2/23
4/2/24
4/2/24
6/11/24
6/11/24
6/11/24
10/2/24
Removal of ability to gate MMFs
Removal of link between WLA and fees
Permit the use of Reverse
(RDM) or floating net asset values (FNAVs)
Discretionary fees
Increased liquidity thresholds and clarification of maturity calculations
Updates to Form N-CR (Reporting form amendment)
Updates to Form N-MFP (Reporting form amendment)
Updates to Form PF (Reporting form amendment)
Mandatory liquidity fees
1st phase
2nd phase
3rd phase
4th phase
2023 SEC money market fund
reform overview
VIEW PDF
For a detailed view of the 2023 amendments and impacted MMFs, click here:
What are the new regulations?
2024
2023
2022
2021
June 11, 2024:
Third phase of
amendments are
effective and MMFs
must comply with them
October 2, 2023:
First, second and fourth
phases of amendments are
effective and MMFs must
comply with first phase
of amendments
2022:
Market particpants,
including Federated Hermes,
wrote comment letters
and met with SEC staff
to discuss the proposal
October 2, 2024:
MMFs must comply with fourth phase
of amendments
April 2, 2024:
MMFs must comply
with second phase
of amendments
August 3, 2023:
New MMF reform
amendments published
in the Federal Register
July 12, 2023:
SEC announced
finalized 2023
amendments
December 2021:
SEC proposed new regulations for MMFs and called for feedback
Reform timeline
In July 2023, the Securities and Exchange Commission (SEC) finalized new reform amendments for money market funds (MMFs). We anticipate minimal impact to retail and government MMFs, while institutional prime and institutional tax-exempt MMFs will be subject to some new or adjusted requirements. A timeline is laid out below summarizing the SEC’s phased approach to when MMFs will need to comply with the new amendments.
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All prime and
tax-exempt MMFs
All prime and
tax-exempt MMFs
Retail prime, retail tax-exempt, and all government MMFs (all stable NAV products)
All prime and
tax-exempt MMFs
(Government MMFs
may opt in)
All MMFs
(Tax-exempt MMFs are not subject to DLA requirements)
All MMFs
All MMFs
Private liquidity funds
Institutional prime and institutional tax-exempt
1
The market impact cost is an estimate of the cost of selling a pro-rata slice of the fund’s portfolio of investments.
1