...SEC Tightens Diversification Rules: In June 2013, the SEC proposed three Rule 2a-7 changes intended to foster greater levels of money market fund (MMF) portfolio diversification; these were in addition to the widely discussed floating net asset value (NAV) and fees and gates proposals. Focus on Limiting Exposure to a Single Entity: To limit single risk concentration levels, the SEC proposes requiring MMFs to consolidate affiliated entities into single issuers and capping exposures to each at 5%. To limit indirect risk to a guarantor, the SEC has proposed applying a 10% concentration limit to each. Little Impact on Fitch-Rated Funds: If the diversification proposals are ultimately adopted, Fitch Ratings would expect minimal impact on Fitch-rated MMFs because diversification guidelines already feature prominently in Fitch's MMF criteria, and fund managers typically manage rated funds within the guidelines. Low Concentration in Fitch Funds: As the chart below shows, as of March 31, 2014, the...
