Pursuant to powers granted to it by Section 120 of the Dodd-Frank Act, on November 13, 2012, the Financial Stability Oversight Council ("FSOC") approved proposed recommendations for the structural reform of money market mutual funds ("MMFs"). The FSOC's release proposes three alternatives for public comment:
- Floating Net Asset Value. Require MMFs to have a floating net asset value ("NAV") per share by removing the special exemption that currently allows MMFs to utilize amortized cost accounting and/or penny rounding to maintain a stable NAV of $1.00.
- Stable NAV with NAV Buffer and "Minimum Balance at Risk." Require MMFs to have an NAV buffer with a tailored amount of assets of up to 1 percent to absorb day-to-day fluctuations in the value of the funds' portfolio securities and allow the funds to maintain a stable NAV. The NAV buffer would be paired with a requirement that 3 percent of a shareholder's highest account value in excess of $100,000 during the previous 30 days — a minimum balance at risk ("MBR") — be redeemed on a delayed basis.
- Stable NAV with NAV Buffer and Other Measures. Require MMFs to have a risk-based NAV buffer of 3 percent to provide explicit loss-absorption capacity that could be combined with other measures to enhance the effectiveness of the buffer and potentially increase the resiliency of MMFs.