In part one of our four-part series, we discussed the U.S. Securities and Exchange Commission (SEC) ESG-related initiatives from 2019 to 2022 that preceded the burst of ESG-related enforcement and rulemaking activity in the first half of 2022. In this second part of the series, we explore this recent enforcement activity. Continue Reading ESG and the SEC: Where Are We Now? (Part 2 of 4)
I was looking for something else on the Division of Investment Management’s (Division) website the other day and ran across a study of Prime MMFs’ Asset Composition and Asset Sales (the Study) released by its Analytics Office in June. Nothing indicates why the Study was prepared, but I hope it reflects an effort by the Division to better understand how prime institutional money market funds operate and the potential consequences of the proposal to require these funds to employ “swing pricing” whenever they have net redemptions. The Study supports my conclusion that this proposal would dilute redeeming shareholders rather than preventing dilution to remaining shareholders. Continue Reading SEC Study Confirms Swing Pricing Proposal Would Dilute Shareholders
In the first half of 2022, we saw significant U.S. Securities and Exchange Commission (SEC) enforcement and rulemaking activity around ESG investing, and the SEC’s intense focus in this area shows no signs of abating as we move through the third quarter. In this four-post series we:
- Summarize the 2019-2021 ESG-related initiatives at the SEC;
- Review the SEC’s ESG-related enforcement activity in the asset management industry;
- Outline the SEC’s May 2022 ESG-related rule proposals for funds and advisers; and
- Suggest factors that mutual fund boards should consider in their oversight of ESG funds and adviser ESG initiatives.
In Andrew Cross and my series on Rule 18f-4, we noted that the SEC was rescinding Release 10666 and related no-action letters as of the compliance date for the rule (August 19, 2022). The release adopting 18f-4 also promised that the Division of Investment Management would review prior guidance and reconcile the guidance to the new rule. In March 2021, the Division issued an information update listing staff letters that have been withdrawn or modified in connection with Rule 18f-4. I’m posting this link as a convenient resource for readers of our series (who have been plentiful and we thank you).
Comments on the SEC’s proposed money market fund reforms were due April 11, so it is time to wrap up my series on the swing pricing proposal included in the reform package. In this final post, I want to consider some baffling references to “liquidity externalities that money market fund liquidity management practices may impose on market participants transacting in the same asset classes.” I cannot find an interpretation of these references that comport with my understanding of “externalities.” Continue Reading Market Externalities and Money Market Funds
This continues my series of posts on the SEC’s proposal to require money market funds with floating net asset values (“institutional money funds”) to implement swing pricing during any pricing period in which the fund has net redemptions. In this post, I consider the effects of swinging a price too frequently. Continue Reading The Cost of Swing Pricing Too Often
This continues my series of posts on the SEC’s proposal to require money market funds with floating net asset values (“institutional money funds”) to implement swing pricing during any pricing period in which the fund has net redemptions. Having surveyed how institutional money funds are supposed to determine swing prices under the proposal, I am turning to when swing pricing would be required. First, I want to consider a unique feature of institutional money funds, namely that many funds calculate a floating net asset value per share (“NAV”) more than once a day. The proposed amendments would define the time from the calculation of one NAV to the next as a “pricing period.” Pricing periods pose two conflicting problems for swing pricing. Continue Reading Swing Pricing and the Problem of Pricing Periods
This continues my series of posts on the SEC’s proposal to require money market funds with floating net asset values (“institutional money funds”) to implement swing pricing during any pricing period in which the fund has net redemptions. Having address the estimated costs that institutional money funds must always include in their swing price, this post considers the “market impact factor” to be included when net redemptions exceed the market impact threshold. I suspect the SEC underestimated the difficulty of estimating market impact factors. Continue Reading Money Fund Liquidity and Market Impacts
On Monday, the SEC announced its much anticipated proposal on climate-related disclosure for public companies. As our colleague Allison Handy explains in her Public Chatter blog, the proposal would require disclosure on climate-related risks financial statement metrics, including information on greenhouse gas emissions, weather-related and other natural events, operational resilience, and the company’s climate-related transition plans, targets, or goals, if any. The rule proposal, SEC Chair Gary Gensler said in the SEC’s press release, was designed to establish “consistent and clear” reporting obligations for companies and to “provide investors with consistent, comparable, and decision-useful information for making their investment decisions.” Rulemaking around corporate human capital disclosure (including workforce and board diversity) and ESG-related matters involving funds and advisers, remain on the SEC’s regulatory agenda.
This is another in my series of posts on the SEC’s proposal to require that money market funds with floating net asset values (“institutional money funds”) implement swing pricing during any pricing period in which the fund has net redemptions. This post continues the analysis of the estimated costs that an institutional money fund “must include, for each security in the fund’s portfolio” when determining any swing price. These costs are:
- Spread costs,
- Brokerage commissions,
- Custody fees, and
- Any other charges, fees, and taxes associated with portfolio security sales.
I cannot tell what this last bullet might include, so I will discuss two expenses that should not be included. Continue Reading Components of Swing Prices—Taxes and Other Charges