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SEC’s Release No. IC-31184 to Remove Credit Ratings from Money Market Fund Rule

Issued by the U.S. Securities and Exchange Commission (“the Commission”), Release No. IC-31184, Removal of Certain References to Credit Ratings and Amendment to the Issuer Diversification Requirement in the Money Market Fund Rule, was approved unanimously on July 23rd. The proposal aims to help the Commission lessen reliance on credit ratings in its rules due to the 2008 financial crisis. Among the changes proposed, most were part of Release No. 33-9408, Money Market Fund Reform, and relate to provisions in Rule 2a-7 of the Investment Company Act of 1940. The Dodd-Frank Act ordered regulatory groups to review rules that use credit ratings and create potential substitute methods for evaluating creditworthiness. While changes to the credit ratings were initially proposed last year, the Commission sought additional feedback from its first round of comments. Other changes in Release No. IC-31184 includes updates to Rule 2a-7’s requirements for portfolio diversification, which depend on securities with credit ratings.

The Commission will publish Release No. IC-31184 at the same time it approved a related set of changes in Release No. 33-9616, Money Market Fund Reform; Amendments to Form PF. The rule is considered the agency’s most noteworthy effort to reform the money market fund industry since the financial crisis. Comments on Release No. IC-31184 are due 60 days after its publication in the Federal Register.

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