SEC extends rule letting money funds pause payouts during crises
Published Date: 3/3/2025
Notice
Summary
The SEC is asking to keep Rule 22e-3, which lets money market funds pause redemptions during a board-approved liquidation to protect investors. This rule affects money market funds and helps them manage tough times without rushing sales. No new costs or deadlines are added, but the rule’s extension keeps things smooth and safe for fund shareholders.
Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
Funds Can Pause Redemptions to Liquidate
If you own shares in a money market fund, Rule 22e-3 lets the fund suspend redemptions and postpone payment of proceeds while it undergoes a board-approved liquidation. This is an exemption from section 22(e), which otherwise limits postponing payment or suspending redemption rights to seven days.
Clear Eligibility Tests for Suspension
Rule 22e-3 sets specific tests a money market fund must meet before suspending redemptions: (i) at the end of a business day the fund has invested less than 10% of total assets in weekly liquid assets or (for government or retail funds) the fund's computed price per share rounded to the nearest one percent has deviated from the board-established stable price and the board determines such a deviation is likely; (ii) the board, including a majority of disinterested directors, irrevocably approves liquidation; and (iii) the fund notifies the Commission before suspending redemptions.
Conduit Funds May Also Pause Redemptions
If you hold shares of a registered investment company that owns money market fund shares under section 12(d)(1)(E) (a ‘‘conduit fund’’), that conduit fund may suspend redemptions if the underlying money market fund suspends redemptions under Rule 22e-3. A conduit fund that relies on the exemption must provide prompt notice of the suspension to the Commission.
Small Annual Notice Burden on Funds
Money market funds or conduit funds that rely on Rule 22e-3 must notify the Commission by electronic mail before suspending redemptions; notices are not kept confidential. The Commission estimates, for PRA purposes, one fund would file such a notice per year, taking about one hour of in-house attorney time at an estimated cost of $511 and total external costs of $584 annually.
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