money market funds

Rating Agency Developments

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On January 18, Moody’s released an update on its methodology for rating money market funds based on comments received to their September 2010 proposal. Moody’s Release.

On January 18, Moody’s released a report outlining several credit concerns that have led to a decline in Moody’s giving the highest ratings to U.S. RMBS resecuritizations. Moody’s Release.

On January 18, Moody’s released its methodology for translating the internal ratings of regulated banks to Moody’s ratings for modeling balance-sheet CLOs. Moody’s Release. Moody’s Methodology.

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Rating Agency Developments

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On September 7, Moody’s requested comments on a proposed new methodology and rating scale for money market funds.  Comments should be received within 60 days. Moody’s Release.

On September 7, S&P revised its recovery rates for CMBS collateral in resecuritizations. S&P Release.

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SEC Money Market Fund Reform

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On February 23, the SEC adopted amendments to the regulatory framework for money market funds, which include requiring funds to: (i) keep a portion of their portfolios in highly liquid investments, (ii) reduce the maximum weighted average maturity of portfolio holdings, and (iii) provide monthly reports on portfolio holdings to the SEC.  The amendments also permit funds that have “broken the buck” or are at imminent risk of breaking the buck to suspend redemptions to allow for the orderly liquidation of fund assets and limit money market funds’ investments in “second tier securities”.  The amendments will be effective on May 10.  SEC Final Rule.

SEC Approves Money Market Fund Reforms

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On January 27, the SEC adopted new rules designed to significantly strengthen the regulatory requirements governing money market funds and better protect investors. The rules impose: (i) tightened maturity and credit quality standards, (ii) new liquidity requirements, (iii) enhanced disclosure, and (iv) operational changes. The rules will be effective 60 days after their publication in the Federal Register, and mandatory compliance with some of the rules will be phased in throughout the year.  SEC Release.  Orrick Client Alert.