Fidelity Investments, the world's largest money market mutual fund provider, has finally weighed in on the SEC's proposed money market fund reforms, claiming that, as written, they would cost the company about $37 million.
"We believe that these costs, when coupled with the negative consequences to shareholders and municipal financing, far outweigh the benefits of further structural reforms," Fidelity said in its letter.
The costs would come from changes to systems, operational processes, shareholder communications and disclosures.
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The company isn't the only one to object to the SEC's money market reform plan. A group of Federal Reserve Bank officials also put its two cents recently, saying that while they support the SEC's attempts to address the risks to financial stability posed by money-market mutual funds, they take issue with some segments of the agency's floating net asset value proposal.
Fidelity doesn't believes the NAV proposal will help achieve the SEC's goal of stemming rapid and significant redemptions. It also doesn't believe the SEC should combine or offer a choice between the SEC's liquidity fees and redemption gates proposal and its floating NAV proposal.
Should the SEC decide to move forward with its efforts, Fidelity asked that the agency exclude tax-exempt money market mutual funds from the floating net asset value and fees and gates proposals.
The SEC's proposal already excludes Treasury and government money market mutual funds.
Fidelity pointed out that the SEC's 2012 study on money market mutual funds "demonstrates that tax-exempt MMFs have strong liquidity positions and are not vulnerable to or likely to experience significant shareholder redemptions."
The company added that tax-exempt MMFs provide a critical source of low-cost financing for state and local governments that will be significantly more expensive if these funds shrink dramatically following SEC reforms that make MMFs and investment vehicle that is no longer useful and attractive.
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