| Debate continues over how best to police money market funds |
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| 31/01/2002 | |
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by Nat Mankelow A widening debate is emerging over how best to regulate the expanding industry of institutional money market funds (MMF), according to market sources. The multi-billion pound market is demanding the close attentions of UK corporate treasurers and cash managers, faced with the prospect of a secure, low risk investment and yields that can potentially outperform standard bank deposit returns. Over recent months, the issue of how best to standardise and ultimately regulate the industry has grown. At present, investments in an institutional money market fund comply with the European regulatory directive UCITS together with the triple-A credit ratings criteria from either Standard & Poor's or Moody's. However, market participants have questioned whether the risk limiting requirements and processes involved in managing funds are best defined under UCITS. As a result, negotiations are underway with the Financial Services Authority and the Central Bank of Ireland in an attempt to have the product "officially" recognised. All MMFs will then be subject to similar regulatory protection afforded to their US counterparts, via SEC's Rule 2a-7 and its amendments. This new UK-based regulatory announcement is due sometime this year. IMMFA, the money-fund standard-bearer, has long seen this as its objective. The industry believes this will greatly enhance the profile of MMFs. |
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