The Institutional Money Market Funds Association (IMMFA) has published a consultation paper, inviting input from the money market fund industry and associated parties on whether local regulation, specific to ‘treasury-style’ money market funds, should be established in European countries where the funds are domiciled, to replace the existing IMMFA Code of Practice.
IMMFA says that, with the implementation of both the Capital Requirements Directive (CRD) and the forthcoming Markets in Financial Instruments Directive (MiFID), ‘treasury-style’ money market funds are expected to have an even more important role to play in support of the liquidity cash management needs of a wider range of institutional investors. As a result, IMMFA believes that the time may have come to seek formal regulation for this type of fund in recognition of its unique stable-capital pricing approach.
The consultation requests views on whether the implementation of local regulation, overseen by trustees as well as fund directors, would place the industry in a stronger position to support this growing investor demand than permitted by the current self-certification regime operating under the IMMFA Code of Practice.
IMMFA says it wishes to stimulate active discussion among market participants – and whilst not intending to pre-empt the outcome of the consultation exercise – has provided an illustration of a potential local regulations approach to assist in the process.
The consultation remains open until the 6 July 2007 and comments from all interested parties are welcome. Following this date, the outcome of the consultation will be made publicly available.
“With the market in ‘treasury-style’ money market funds set for a period of significant expansion as a result of the changing regulatory landscape, the industry has a responsibility to its investors to ensure that the excellent track record and integrity of the product remains sound,” says Donald Aiken, Chairman of IMMFA. “Today’s consultation seeks to answer the question – does the current Code of Practice go far enough to achieve this aim, or will the adoption of local regulations provide additional safeguards for investors.” The consultation paper is available at www.immfa.org/consultation/Local-Regulation.pdf.