OCC Provides Guidance on Revised SEC Money Market Fund Rules

The Office of the Comptroller of the Currency (“OCC”) provided guidance to national banks and federal savings associations on the 2014 SEC revised money market fund (“MMF”) rules. The guidance (i) describes how the SEC’s MMF rules will likely affect banks, (ii) addresses product and process changes that affected banks should consider, and (iii) highlights potential compliance, liquidity, operational and strategic risks. The guidance emphasized that while the SEC’s MMF rules do not directly apply to banks, they do have many implications for the way banks conduct their business. For example, some banks will now need to be able to report and process transactions to four decimal places due to the possibility that an MMF’s NAV will float.

Lofchie Comment: Just like banks, broker-dealers should also review their treatment of MMFs that have a floating share value or that otherwise do not behave in the same manner as “traditional” MMFs. For example, one question that firms must consider is whether or not a share in a floating value MMF should be treated as a cash-equivalent for margin purposes.