Letter to the SEC commenting on proposed amendments to remove references to credit ratings of nationally recognized statistical rating organizations

SUMMARY

In a letter to the SEC, the Committee on Investment Management Regulation provided comments on proposed amendments to Rule 2a-7 that would, among other things, remove references to credit ratings of nationally recognized statistical rating organizations in Rule 2a-7. The letter urges that in the amended Rule or in commentary, the SEC clearly set forth explicit recognition of the legal standards the SEC will apply to actions a board of directors of a money market fund might take to promote the fund’s compliance with the Rule, and that such explicit standards should recognize that board action be measured by the reasonableness of the board’s exercise of its business judgment. The letter also comments on the “exceptionally strong capacity” standard that a money market security would be required to meet to be an “eligible security” under the proposed amendments, and addresses provisions of the proposed amendments concerning the monitoring of minimal credit risks.