Friday, September 11, 2015

U.S. Leads the Way in Money Market Reform

IOSCO Finds that the U.S. has Made the Most Headway in Money Market Fund Regulation

Author: David Schwartz J.D. CPA

In a report published earlier this week, the Board of the International Organization of Securities Commissions (IOSCO) found that, among the major jurisdictions in the money market fund (MMF) industry, the United States has made the most progress in regulatory reforms.  Using the most current data available, IOSCO determined that the global MMF market is dominated by five jurisdictions: the U.S., France, Luxembourg, Ireland and China. Together, these five jurisdictions account for just under 90% of global assets under management in MMFs.

While participating jurisdictions had made progress in introducing implementation measures across eight reform areas, only the U.S. reported having implemented final measures in all eight reform areas, with China and the EU members still in the process of developing and finalizing relevant reforms.

The eight reform areas are: 

  1. Definition of MMFs 
  2. Limitations to asset types and risks
  3. Valuation
  4. Liquidity management
  5. MMFs that offer a stable NAV
  6. Use of ratings
  7. Disclosure to investors
  8. MMF Repo transactions

This latest review was conducted at the request of the G20.  IOSCO agreed to conduct a review consisting of an implementation progress report on the current regulatory reform efforts of participating jurisdictions, with the possibility of a separate review being conducted once national or regional implementation of regulatory reform is deemed sufficiently underway.

The main objective of the review was to identify progress in adopting legislation, regulation and other policies in relation to MMFs in the eight areas noted above. The review also considered market and regulatory developments in each participating jurisdiction which may have affected MMFs or the MMF industry since the IOSCO's initial repoert in 2012. It also sought to identify differences in approach to, and in progress of, implementation, or proposed implementation, of regulatory reforms, with commentary on the drivers for these differences and whether further implementation monitoring is recommended.  IOSCO stresses that, while this latest review reports on the status and timeliness of reforms, it does not assess the consistency of implementation measures against the 2012 IOSCO Report's recommendations.

The report recommends that another review be undertaken in 2016 to assess the progress jurisdictions have made in their MMF reforms. IOSCO recommends that the 2016 review focus exclusively on the 15 jurisdictions identified in the current report as having a significant MMF industry in which final implementation measures are still not implemented in one or more of the eight reform areas.