House Begins to Reverse “Floating” NAVsBy
The House Financial Services Committee passed a bill that would restore the “stable NAV” for prime money market funds (MMFs), which corporations rely on for short-term funding needs.
The Consumer Financial Choice and Capital Markets Protection Act (H.R. 2319) would undo part of a rule that the Securities & Exchange Commission (SEC) passed in 2014 that required prime and tax-exempt institutional MMFs to price and transact in their shares using “floating” net asset values (NAV). Prior to that, MMFs used a stable $1.00/share net asset value.
The SEC rule went into effect on October 14, 2016. It’s had a negative effect on businesses, universities, state and local governments, and others, according to the Coalition for Investor Choice. “Prime funds, a key source of funding for corporations, saw a 72% drop from January 2015 while tax-exempt funds, a key source of funding for municipalities, universities and hospitals, experienced a more than 50% decline over the same period,” the Coalition said in a statement to the Senate Banking Committee on April 13, 2017, in conjunction with the Association for Financial Professionals and Government Officers Finance Association. But the Investment Company Institute, whose members offer MMFs, opposes the bill, which passed the committee by a vote of 34-21 on January 18, 2018.