Rule 2a-7 Supporting Statement (2013) Final

SUPPORTING STATEMENT
Rule 2a-7
A.

JUSTIFICATION
1.

Necessity for the Collection Information

Money market funds are open-end management investment companies that differ from
other open-end management investment companies in that they seek to maintain a stable price
per share, usually $1.00. Rule 2a-7 [17 CFR 270.2a-7] under the Investment Company Act of
1940 [15 U.S.C. 80a] (the “Act”) exempts money market funds from the valuation requirements
of the Act, and, subject to certain risk-limiting conditions, permits money market funds to use the
“amortized cost method” of asset valuation or the “penny-rounding method” of share pricing.
Rule 2a-7 also imposes certain recordkeeping and reporting obligations on money market
funds. The board of directors of a money market fund, in supervising the fund's operations, must
establish written procedures designed to stabilize the fund's net asset value (“NAV”). The board
must also adopt guidelines and procedures relating to certain responsibilities it delegates to the
fund's investment adviser. These procedures and guidelines typically address various aspects of
the fund's operations. The fund must maintain and preserve for six years a written copy of both
these procedures and guidelines. The fund also must maintain and preserve for six years a
written record of the board's considerations and actions taken in connection with the discharge of
its responsibilities, to be included in the board's minutes. In addition, the fund must maintain and
preserve for three years written records of certain credit risk analyses, evaluations with respect to
securities subject to demand features or guarantees, and determinations with respect to adjustable
rate securities and asset backed securities. If the board takes action with respect to defaulted
securities, events of insolvency, or deviations in share price, the fund must file with the
Commission an exhibit to Form N-SAR (OMB Control No. 3235-0330) describing the nature

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and circumstances of the action. If any portfolio security fails to meet certain eligibility
standards under the rule, the fund also must identify those securities in an exhibit to Form NSAR. After certain events of default or insolvency relating to a portfolio security, the fund must
notify the Commission of the event and the actions the fund intends to take in response to the
situation.
In addition, money market fund boards must adopt written procedures that provide for
periodic testing (and reporting to the board) of the fund’s ability to maintain a stable NAV per
share based on certain hypothetical events. Funds must also post monthly portfolio information
on their websites and maintain records of creditworthiness evaluations on counterparties to
repurchase agreements that the fund intends to “look through” for purposes of rule 2a-7’s
diversification limitations. Finally, money market funds must promptly notify the Commission
of the purchase of any money market fund’s portfolio security by an affiliated person in reliance
on rule 17a-9 under the Act and explain the reasons for such purchase.
On June 5, 2013, the Commission issued a release proposing two alternatives as part of a
money market reform proposal. Under the first alternative, prime institutional money market
funds would be required to float their net asset value (“floating NAV proposal”). Under the
second alternative, money market funds whose weekly liquid assets fell below 15% of total
assets would be required to impose a 2% liquidity fee unless the fund’s board of directors
determines that such a fee would not be in the best interest of the fund, and permit the funds to
suspend redemptions temporarily (i.e., “gate” the fund) (“liquidity fees and gates proposal”). 1
Under our floating NAV proposal, money market funds (other than government and retail
money market funds) would no longer be permitted to use amortized cost or penny-rounding to
1

See Money Market Fund Reform; Amendments to Form PF, Investment Company Act Release
No. 30551 (June 5, 2013).

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maintain a stable price per share; instead, money market funds would be required to compute
their share price by rounding the fund’s current price per share to the fourth decimal place (in the
case of a fund with a $1.0000 share price). Under the floating NAV alternative, the Commission
is proposing to amend rule 2a-7 (and consequently, amend or establish new collection of
information burdens) by: (a) requiring that retail money market funds seeking to rely on the
exemption from our floating NAV proposal implement policies and procedures reasonably
designed to allow the conclusion that Omnibus Account Holders do not permit beneficial owners
of the fund from redeeming more than the permissible daily amount; (b) requiring money market
funds to be diversified with respect to the sponsors of asset-backed securities by deeming the
sponsor to guarantee the asset-backed security unless the fund’s board of directors makes a
special finding otherwise; (c) replacing the requirement that funds promptly notify the
Commission via electronic mail of defaults and other events with disclosure on new Form N-CR
(a new collection of information submitted to OMB on June 24th, 2013); (d) eliminating the
required procedure that money market funds’ boards adopt written procedures that include
shadow pricing; (e) amending the stress testing requirements; and (f) amending the disclosures
that money market funds are required to post on their websites. Several of the proposed
amendments would create new collection of information requirements. Under the liquidity fees
and gates proposal, as discussed below, the proposed amendments will add a new collection of
information for board reporting and modify or eliminate other collections of information
described under our proposed floating NAV alternative.
2.

Purpose of the Information Collection

The recordkeeping requirements in rule 2a-7 are designed to enable Commission staff in
its examinations of money market funds to determine compliance with the rule, as well as to

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ensure that money market funds have established procedures for collecting the information
necessary to make adequate credit reviews of securities in their portfolios. The reporting
requirements of rule 2a-7 are intended to assist Commission staff in overseeing money market
funds, reducing the likelihood that a fund is unable to maintain a stable NAV (where a fund
seeks to maintain a stable NAV), mitigating funds’ susceptibility to heavy redemptions in times
of stress, and increasing the transparency of risk in money market funds.
3.

Role of Improved Information Technology

The Commission's Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”) is designed to automate the filing, processing and dissemination of full disclosure
filings. The system permits publicly-held companies to transmit their filings to the Commission
electronically. EDGAR has increased the speed, accuracy and availability of information,
generating benefits to investors and financial markets. All funds have been required to use
EDGAR for their disclosure filings since November 6, 1995. The exhibit to Form N-SAR
required to be filed with the Commission under rule 2a-7 when a money market fund's board
takes action with respect to defaults, insolvencies, or share price deviations or when a portfolio
security fails to meet certain standards may be filed electronically through EDGAR. Under both
the floating NAV proposal and the liquidity fees and gates proposal, new Form N-CR would
replace the disclosures currently made in exhibits to Form N-SAR. Form N-CR would also be
filed electronically through EDGAR. In addition to electronic filing of the exhibit to Form NSAR (or, under our proposal, Form N-CR), money market funds are required to post monthly
portfolio information on their websites, taking advantage of investors’ widespread use of the
Internet to obtain investment information.

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4.

Efforts to Identify Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication, and reevaluates them whenever it proposes a rule or form, or a
change in either. The recordkeeping, reporting, and website posting required by rule 2a-7 are not
duplicated elsewhere.
5.

Effect on Small Entities

The recordkeeping and reporting requirements of rule 2a-7 are the same for all money
market funds, including those that are small entities. A significant portion of the recordkeeping
burden involves organizing information that the funds already collect when initially purchasing
securities. In addition, when a money market fund analyzes a security, the analysis need not be
presented in any particular format. Money market funds therefore have a choice of methods for
maintaining these records that vary in technical sophistication and formality (e.g., handwritten
notes, computer disks, etc.). Pursuant to 5 U.S.C. section 605(b), the Commission certified that
our proposed amendments to rule 2a-7 would not have a significant effect on small entities.
6.

Consequences of Less Frequent Collection

As described in section 1, rule 2a-7 requires the fund’s board to adopt (i) written
procedures designed to stabilize the fund’s NAV; (ii) written guidelines regarding the delegation
of certain responsibilities; and (iii) written guidelines that provide for periodic stress testing. In
addition, rule 2a-7 requires the fund to notify the Commission if the board takes certain actions
or if certain events of default or insolvency occur, or there is a purchase of a fund’s portfolio
security by an affiliated person in reliance on rule 17a-9. None of these is a recurring obligation.
They are, however, essential to the Commission's ability to determine compliance with the rule.

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The rule also requires money market funds to perform periodic analyses of portfolio
securities and reviews of the credit risks associated with those securities, as well as maintain
records of creditworthiness determinations specific to counterparties in repurchase agreements.
The frequency of these reviews is within a fund’s discretion. The reviews are necessary to
ensure that securities that remain in a fund’s portfolio continue to present minimal credit risks.
Finally, rule 2a-7 requires that money market funds post monthly portfolio information
on their websites within five business days after the end of each month. We believe that this
monthly frequency allows current and prospective investors in the fund to have timely
information about the fund without excessively burdening money market funds. Money market
funds voluntarily provide this information on their websites even more frequently than monthly.
Regarding the proposed amendments to rule 2a-7 (under either alternative proposal),
most of the proposed amendments that affect collection of information requirements do not
change the frequency of collection burdens. The proposed amendments do increase the
collection burden frequency for certain new website disclosure requirements, for example,
requiring daily website updates for the fund’s daily and weekly liquid assets, the fund’s net
inflows or outflows, and the fund’s daily current NAV per share. The proposed website
disclosures will provide current and prospective investors with timely information about the fund
without excessively burdening money market funds. Many money market funds already
voluntarily disclose current NAV per share data daily on their websites and at least one fund
plans to begin disclosing on funds’ websites the daily and weekly liquid assets on a daily basis.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

Rule 2a-7 requires money market funds to retain certain written records for more than
three years. The fund must maintain and preserve for six years a written copy of the procedures

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established by the board of directors designed to stabilize the fund's NAV, records of the reports
to the board on stress tests and records of determinations of credit quality of counterparties to
repurchase agreements, and a written record of the board's considerations and actions taken in
connection with the discharge of its responsibilities. The long-term retention of these records is
necessary to allow Commission inspection staff to determine compliance with rule 2a-7. Rule
2a-7 also requires funds to post portfolio information monthly, and as amended, would require
funds to post certain portfolio information daily. Given the short-term nature of money market
fund portfolio holdings, this increased frequency of information collection is necessary to
provide portfolio information that is meaningful to investors.
8.

Consultation Outside the Agency

The Commission requested public comment on the collection requirements in rule 2a-7
before it submitted this request for revision and approval to the Office of Management and
Budget. We will consider all comments received on the proposed amendments.
The Commission and the staff of the Division of Investment Management also participate
in an ongoing dialogue with representatives of the investment company industry through public
conferences, meetings and informal exchanges. These various forums provide the Commission
and the staff with a means of ascertaining and acting upon paperwork burdens confronting the
industry.
9.

Payment or Gift to Respondents

Not applicable.

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10.

Assurance of Confidentiality

To the extent that the Commission receives confidential information pursuant to this
collection of information, such information would be kept confidential, subject to the provisions of
applicable law.

11.

Sensitive Questions

Not applicable.
12.

Estimates of Hour Burden

In our most recent Paperwork Reduction Act submission for rule 2a-7, Commission staff
estimated the annual compliance burden to comply with the collection of information
requirements of rule 2a-7 is 517,228 hours. The proposed amendments would affect the staff’s
estimates of the hour burden as described below.
i.

Floating NAV Proposal
a.

Retail Exemption from Floating NAV

Under the floating NAV proposal, retail money market funds would be exempt from
floating their price per share; instead, retail funds would be permitted to maintain a stable price
per share by computing its current price per share using the penny-rounding method. A retail
money market fund would mean a money market fund that does not permit any shareholder of
record to redeem more than $1 million each business day. The proposed amendment would
permit a shareholder of record to redeem more than $1 million on any one business day if the
shareholder of record is a broker, dealer, bank, or other person that holds securities issued by the
money market fund in nominee name (“Omnibus Account Holder”) and the fund (or others in the
intermediary chain) has policies and procedures reasonably designed to allow the conclusion that
the Omnibus Account Holder does not permit any beneficial owner of the fund’s shares, directly

9
or indirectly, to redeem more than the daily permitted amount. This requirement is a collection
of information under the PRA and would be mandatory for money market funds that rely on the
exemption in proposed rule 2a-7(c)(3), and to the extent that the Commission receives
confidential information pursuant to this collection of information, such information would be
kept confidential, subject to the provisions of applicable law.

For purposes of the PRA, staff estimates that approximately 100 money market fund
complexes would rely on the proposed retail fund exemption and therefore be required to adopt
written policies and procedures to ensure that Omnibus Account Holders apply the daily
redemption limit to beneficial owners. 2 Staff estimates that it would take approximately 12
hours of a fund attorney’s time to prepare the procedures and one hour for a board to adopt the
procedures, at an internal labor cost of approximately $8,548 per fund complex. 3 Therefore, staff
estimates the one-time burden to prepare and adopt these procedures would be approximately
1,300 hours 4 at $854,800 in total internal labor costs for all fund complexes. 5 Amortized over a

2

For purposes of the PRA, staff estimates that those money market funds that self-reported as “retail” funds
as of February 28, 2013 (based on iMoney.net data) would likely rely on the proposed retail exemption
from our floating NAV proposal.

3

This estimate is based on the following calculation: ([12 hours x $379 per hour for an attorney = $4,548] +
[1 hour x $4,000 per hour for a board of 8 directors = $4,000] = $8,548). All estimated wage figures
discussed here and throughout section IV of this Release are based on published rates have been taken from
SIFMA’s Management & Professional Earnings in the Securities Industry 2012, available at
http://www.sifma.org/research/item.aspx?id=8589940603, modified by Commission staff to account for an
1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and
overhead.

4

This estimate is based on the following calculation: 12 burden hours to prepare written procedures + 1
burden hour to adopt procedures = 13 burden hours per money market fund complex; 13 burden hours per
fund complex x 100 fund complexes = 1,300 total burden hours for all fund complexes.

5

This estimate is based on the following calculation: 100 fund complexes x $8,548 in total costs per fund
complex = $854,800.

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three-year period, this would result in an average annual burden of approximately 433 hours and
internal labor costs of $284,933 for all funds. 6
b.

Asset-Backed Securities

Under the floating NAV proposal, funds would be required to treat the sponsor of an SPE
issuing ABS as a guarantor of the ABS subject to rule 2a-7’s diversification limitations
applicable to guarantors and demand feature providers, unless the fund’s board of directors (or
its delegate) determines that the fund is not relying on the sponsor’s financial strength or its
ability or willingness to provide liquidity. The board of directors would be required to adopt
written procedures requiring periodic evaluation of this determination. Furthermore, for a period
of not less than three years from the date when the evaluation was most recently made, the fund
must preserve and maintain in an easily accessible place a written record of the evaluation. This
requirement is a collection of information under the PRA and would be mandatory for money
market funds that rely on rule 2a-7, and to the extent that the Commission receives confidential
information pursuant to this collection of information, such information would be kept
confidential, subject to the provisions of applicable law.

Based on a review of reports on Form N-MFP, Commission staff estimates that
approximately 183 money market funds hold asset-backed securities and would be required to
adopt written procedures regarding the periodic evaluation of determinations made by the fund
as to ABS not subject to guarantees. Staff estimates that it would take approximately eight hours
of a fund attorney’s time to prepare the procedures and one hour for a board to adopt the
procedures. Therefore, staff estimates the one-time burden to prepare and adopt these
procedures would be approximately nine hours per money market fund, at an internal labor cost
6

This estimate is based on the following calculation: 1,300 burden hours ÷ 3 = 433 average annual burden
hours; $854,800 burden costs ÷ 3 = $284,933 average annual burden cost.

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of approximately $7,032 per fund. 7 Therefore, staff estimates the one-time burden to prepare
and adopt these procedures would be approximately 1,647 hours 8 at $1.2 million in total internal
labor costs for all money market funds. 9 Amortized over a three-year period, this would result in
an average annual burden of approximately 549 hours and internal labor costs of $400,000 for all
funds. 10
Commission staff further estimates that the 183 money market funds we estimate would
adopt such written procedures would spend, on an annual basis, (i) two hours of a fund attorney’s
time to prepare materials for the board’s review of new and existing determinations, (ii) one hour
for the board to review those materials and make the required determinations, and (iii) one hour
of a fund attorney’s time per year, on average, to prepare the written records of such
determinations. 11 Therefore, staff estimates that the average annual burden to prepare materials
and written records for a board’s required review of new and existing determinations would be
approximately four hours per fund 12 at an internal labor cost of approximately $5,137 per fund. 13

7

This estimate is based on the following calculation: [8 hours x $379 per hour for an attorney = $3,032] + [1
hour x $4,000 per hour for a board of 8 directors = $4,000] = $7,032.

8

This estimate is based on the following calculation: 8 burden hours to prepare written procedures + 1
burden hour to adopt procedures = 9 burden hours per money market fund required to adopt procedures; 9
burden hours per money market fund x 183 funds expected to adopt procedures = 1,647 total burden hours.

9

This estimate is based on the following calculation: 183 money market funds x $7,032 in total costs per
fund complex = $1.2 million.

10

This estimate is based on the following calculations: 1,647 burden hours ÷ 3 = 549 average annual burden
hours; $1.2 million burden costs ÷ 3 = $400,000 average annual burden cost.

11

This estimate includes documenting, if applicable, the fund board’s determination that the fund is not
relying on the fund sponsor’s financial strength or its ability or willingness to provide liquidity or other
credit support to determine the ABS’s quality or liquidity.

12

This estimate is based on the following calculation: 2 hours to adopt + 1 hour for board review + 1 hour for
record preparation = 4 hours per year.

13

This estimate is based on the following calculations: [3 hours x $379 per hour for an attorney = $1,137] +
[1 hour x $4,000 per hour for a board of 8 directors = $4,000] = $5,137.

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Therefore, staff estimates the annual burden would be approximately 732 burden hours 14 and
$940,071 in total internal labor costs for all money market funds. 15 Amortized over a three-year
period, this would result in an average annual burden of approximately 244 hours and internal
labor costs of $313,357 for all funds. 16
c.

Notice to the Commission

Rule 2a-7 currently requires that money market funds promptly notify the Commission
by electronic mail of any default or event of insolvency with respect to the issuer of one or more
portfolio securities (or any issuer of a demand feature or guarantee) where immediately before
the default the securities comprised one half of one percent or more of the fund’s total assets. 17
In addition, money market funds must also provide notice to the Commission of any purchase of
its securities by an affiliated person in reliance on rule 17a-9 under the Investment Company
Act. 18 Based on conversations with individuals in the mutual fund industry, staff has previously
estimated that the burden associated with these requirements is (1) .5 burden hours of
professional legal time per response for each notification of an event of default or insolvency,
and (2) 1.0 burden hours of professional legal time per response for each notification of the
purchase of a money market fund’s portfolio security by certain affiliated persons in reliance on
rule 17a-9.

14

This estimate is based on the following calculation: 4 burden hours per money market fund x 183 funds
= 732 total burden hours.

15

This estimate is based on the following calculation: 183 money market funds x $5,137 in total costs per
fund complex = $940,071.

16

This estimate is based on the following calculation: 732 burden hours ÷ 3 = 244 average annual burden
hours; $940,071 burden costs ÷ 3 = $313,357 average annual burden cost.

17

Rule 2a-7(c)(7)(iii)(A) (requiring that the notice include a description of the actions the money market fund
intends to take in response to the event).

18

Rule 2a-7(c)(7)(iii)(B) (requiring that the notice include identification of the security, its amortized cost,
the sale price, and the reasons for the purchase).

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Under our floating NAV proposal, rule 2a-7 would no longer require that money market
funds provide electronic notice of any event of default or insolvency of a portfolio security and
any purchase by a fund of a portfolio security by an affiliate in reliance on rule 17a-9. 19 Staff
estimates that elimination of these requirements would reduce the current annual burden by 0.5
hours for notices of default or insolvency and 1 hour for notices of purchases in reliance on rule
17a-9. Based on our prior estimate of 20 money market funds per year that would be required to
provide the notification of an event of default or insolvency, staff estimates that the proposed
amendment would reduce the current collection of information by approximately 10 hours
annually, at a total internal labor savings of $3,790. 20 Based on our prior estimate of 25 money
market fund complexes per year that would be required to provide the notification of a purchase
of a portfolio security in reliance on rule 17a-9, staff estimates that the proposed amendment
would reduce the current collection of information by approximately 25 hours annually, at a total
internal labor cost savings of $9,475. 21
d.

Required Procedures

Rule 2a-7 currently requires that money market funds establish written procedures
designed to stabilize the fund’s NAV 22 and guidelines and procedures relating to the board’s
delegation of authority. 23 Based on conversations with individuals in the mutual fund industry,
staff has previously estimated that the burden associated with these requirements is a one-time

19

These requirements are being replaced by new disclosure required on proposed Form N-CR. The
collection burdens for Form N-CR are a part of a separate PRA submission for proposed new rule 30b1-8.

20

This estimate is based on the following calculations: 20 funds x 0.5 reduction in hours per fund = reduction
of 10 hours; 10 burden hours x $379 per hour for an attorney = $3,790.

21

This estimate is based on the following calculations: 25 fund complexes x 1reduction in hours per fund =
reduction of 25 hours; 25 hours x $379 per hour for an attorney = 9,475.

22

See rule 2a-7(c)(8)(ii).

23

See rule 2a-7(e)(1).

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15.5 burden hours per response for each new money market fund to formulate and establish these
written procedures and guidelines. 24
The Commission is proposing to eliminate the requirement that money market funds
establish written procedures providing for the board’s periodic review of the fund’s shadow
price, the methods used for calculating the shadow price, and what action, if any, the board
should initiate if the fund’s shadow price exceeds amortized cost by more than ½ of 1%. Staff
estimates that elimination of this requirement would eliminate the current one-time 15.5 burden
hours for each new money market fund to formulate and establish these written procedures and
guidelines. Based on our prior estimate of 10 new money market funds per year that would be
required to formulate and establish these written procedures and guidelines, staff estimates that
the proposed amendments would reduce the current collection of information by approximately
155 hours, at a total internal labor cost savings of $60,940. 25
e.

Stress Testing

Under the floating NAV proposal, the stress testing provision of rule 2a-7 would be
amended to enhance the hypothetical events for which a fund (or its adviser) is required to stress
test, including: (i) increases (rather than changes) in the general level of short-term interest rates;
(ii) downgrades or defaults of portfolio securities, and the effects these events could have on
other securities held by the fund; (iii) “widening or narrowing of spreads among the indexes to
which interest rates of portfolio securities are tied”; (iv) other movements in interest rates that
may affect the fund’s portfolio securities, such as shifts in the yield curve; and (v) combinations

24

The 15.5 hours is comprised of: 0.5 hours of the board of directors’ time; 7.2 hours of professional legal
time; and 7.8 hours of support staff time.

25

This estimate is based on the following calculations: 10 funds x 15.5 reduction in hours per fund =
reduction of 155 hours; 10 funds x ([0.5 hours x $4,000 per hour for board time] + [7.2 hours x $379 per
hour for an attorney] + [7.8 hours x $175 for a Paralegal]) = $60,940.

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of these and any other events the adviser deems relevant, assuming a positive correlation of risk
factors. Floating NAV money market funds would be required to replace their current stress test
for the ability to maintain a stable price per share with a test of the fund’s ability to maintain
15% of its total assets in weekly liquid assets. Funds that are exempt from our floating NAV
requirement would continue to test the fund’s ability to maintain a stable share price as well. A
written copy of the procedures, and any modifications thereto, must be maintained and preserved
for a period of not less than six years following the replacement of such procedures with new
procedures, the first two years in an easily accessible place. This requirement is a collection of
information under the PRA, and is designed to address disparities in the quality and
comprehensiveness of stress tests. The new collection of information would be mandatory for
money market funds that rely on rule 2a-7, and to the extent that the Commission receives
confidential information pursuant to this collection of information, such information would be
kept confidential, subject to the provisions of applicable law.

We understand that most money market funds, in their normal course of risk
management, include the elements we are proposing in their stress testing. Nevertheless, some
smaller funds that perform their own stress testing (rather than use a third party service provider)
may incur a one-time internal burden to reprogram an existing system to provide the required
reports of stress testing results based on our proposed amendments. Staff estimates that each
fund that would have to implement the proposed stress testing changes would incur an average
one-time burden of 92 hours at a internal labor cost of $42,688. 26 Based on an estimate of 92
26

Staff estimates that these systems modifications would include the following costs: (i) project planning and
systems design (24 hours x $291 (hourly rate for a senior systems analyst) = $6,984); (ii) systems
modification integration, testing, installation, and deployment (32 hours x $282 (hourly rate for a senior
programmer) = $9,024); (iii) drafting, integrating, implementing procedures and controls (24 hours x $327
(blended hourly rate for assistant general counsel ($467), chief compliance officer ($441), senior EDP
auditor ($273) and operations specialist ($126)) = $7,848); and (iv) preparation of training materials ((8
hours x $354 (hourly rate for an assistant compliance director)) + (4 hours (4 hour training session for

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funds that would incur this one-time burden, 27 staff estimates that the aggregate one-time burden
for all money market funds to implement the proposed amendments to stress testing would be
8,464 hours at a total internal labor cost of $3.9 million. 28 Amortized over a three-year period,
this would result in an average annual burden of 2,821 burden hours and $1.3 million total
internal labor cost for all funds. 29
f.

Website Disclosure

The floating NAV proposal would amend the information money market funds are
required to disclose on their websites. These amendments would promote transparency to
investors of money market funds’ risks and risk management by:
• Harmonizing the specific portfolio holdings information that rule 2a-7 currently
requires funds to disclose on the fund’s website with the corresponding portfolio
holdings information proposed to be reported on Form N-MFP;
• Requiring that a fund disclose on its website a schedule, chart, graph, or other
depiction showing the percentage of the fund’s total assets that are invested in
daily and weekly liquid assets, as well as the fund’s net inflows or outflows, as of
the end of each business day during the preceding six months (which depiction
must be updated each business day as of the end of the preceding business day);
• Requiring that a fund disclose on its website a schedule, chart, graph, or other

board of directors) x $4,000 (hourly rate for board of 8 directors)) = $18,832). Therefore, staff estimates an
average one-time burden of 92 hours (24+32+24+8+4), at a total cost per fund of $42,688
($6,984+$9,024+$7,848+$18,832).
27

This estimate is based on staff experience and discussions with industry.

28

This estimate is based on the following calculations: 92 funds x 92 hours per fund = 8,464 hours; 92 funds
x $42,688 = $3.9 million.

29

This estimate is based on the following calculations: 8,464 hours ÷ 3 = 2,821 burden hours; $3.9 million ÷
3 = $1.3 million burden cost.

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depiction showing the fund’s daily current NAV per share, as of the end of each
business day during the preceding six months (which depiction must be updated
each business day as of the end of the preceding business day); and
• Requiring a fund to disclose on its website substantially the same information that
the fund is required to report to the Commission on Form N-CR regarding the
provision of financial support to the fund.
These new collections of information would be mandatory for money market funds that rely on
rule 2a-7, and to the extent that the Commission receives confidential information pursuant to
these collections of information, such information would be kept confidential, subject to the
provisions of applicable law.

i.

Disclosure of Portfolio Holdings Information

Because the new information that a fund would be required to disclose on its website
overlaps with the information that a fund would be required to disclose on Form N-MFP, we
anticipate that the burden for each fund to draft and finalize the disclosure that would appear on
its website would largely be incurred when the fund files Form N-MFP. Commission staff
estimates that a fund would incur an additional burden of 1 hour each time that it updates its
website to include the new disclosure. Using an estimate of 586 money market funds that would
be required to include the proposed new portfolio holdings disclosure on the fund’s website, 30
staff estimates that each fund would incur 12 additional hours of internal staff time per year (1
hour per monthly filing), at an internal labor cost of $2,484, 31 to update the website to include the

30

This estimate is based on a staff review of reports on Form N-MFP filed with the Commission for the
month ended February 28, 2013.

31

This estimate is based on the following calculation: 12 hours x $207 per hour for a webmaster = $2,484.

18
new disclosure, for a total of 7,032 aggregate hours per year, 32 at a total aggregate internal labor
cost of $1,455,624. 33

ii.

Disclosure of Daily Liquid Assets and Weekly Liquid
Assets
The burdens associated with the proposed requirement for a fund to disclose on its
website a schedule, chart, graph, or other depiction showing the percentage of the fund’s total
assets that are invested in daily and weekly liquid assets, as well as the fund’s net inflows or
outflows, include one-time burdens as well as ongoing burdens. Staff expects that each money
market fund would incur a one-time burden of 70 hours, 34 at an internal labor cost of $20,150, 35
to design the required schedule, chart, graph, or other depiction, and to make the necessary
software programming changes to the fund’s website to disclose the percentage of the fund’s
total assets that are invested in daily liquid assets and weekly liquid assets, as well as the fund’s
net inflows or outflows, as of the end of each business day during the preceding six months.
Using an estimate of 586 money market funds, staff estimates that money market funds would

32

This estimate is based on the following calculation: 12 hours per year x 586 money market funds = 7,032
hours.

33

This estimate is based on the following calculation: 7,032 hours x $207 per hour for a webmaster =
$1,455,624.

34

Commission staff estimates that the lower bound of the range of the initial, one-time hour burden to design
and present the historical depiction of daily and weekly liquid assets and the fund’s net inflows and
outflows would include the following: 16 hours (project assessment) + 40 hours (project development,
implementation, and testing) = 56 hours. Commission staff estimates that the upper bound of the range of
the initial, one-time hour burden to design and present the historical depiction of daily and weekly liquid
assets and the fund’s net inflows and outflows would include the following: 24 hours (project assessment)
+ 60 hours (project development, implementation, and testing) = 84 hours. For purposes of our estimates
for the PRA analysis, we have taken the midpoint of the range discussed above (mid-point of 56 hours and
84 hours = 70 hours).

35

This estimate is based on the following calculations: (20 hours (mid-point of 16 hours and 24 hours for
project assessment) x $290 (blended rate for a compliance manager and a compliance attorney) = $5,800) +
(50 hours (mid-point of 40 hours and 60 hours for project development, implementation, and testing) x
$287 (blended rate for a Senior Systems Analyst and senior programmer) = $14,350) = $20,150 per fund.

19
incur, in aggregate, a total one-time burden of 41,020 hours, 36 at an internal labor cost of
$11,807,900, 37 to comply with these website disclosure requirements. Staff estimates that each
fund would incur an ongoing annual burden of 32 hours, 38 at an internal labor cost of $9,184, 39 to
update the depiction of daily and weekly liquid assets and the fund’s net inflows or outflows on
the fund’s website each business day during that year; in aggregate, staff estimates that money
market funds would incur an average ongoing annual burden of 18,752 hours, 40 at an internal
burden cost of $5,381,824, 41 to comply with this disclosure requirement. Amortizing these
hourly and cost burdens over three years results in an average annual increased burden of 26,175
burden hours 42 at an internal labor cost of $7,523,849. 43
iii.

Disclosure of Daily Current NAV

The burdens associated with the proposed requirement for a fund to disclose on its
website a schedule, chart, graph, or other depiction showing the fund’s daily current NAV as of
the end of the previous business day include one-time burdens as well as ongoing burdens.
36

This estimate is based on the following calculation: 70 hours x 586 money market funds = 41,020 hours.

37

This estimate is based on the following calculation: $20,150 per fund x 586 money market funds =
$11,807,900.

38

Commission staff estimates that the lower bound of the range of the ongoing annual hour burden to update
the required website information would be 21 hours per year (5 minutes per day x 252 business days in a
year = 1,260 minutes, or 21 hours). Commission staff estimates that the upper bound of the range of the
ongoing annual hour burden to update the required website information would be 42 hours per year (10
minutes per day x 252 business days in a year = 2,520 minutes, or 42 hours). For purposes of our estimates
for the PRA analysis, we have taken the mid-point of the range discussed above (mid-point of 21 hours and
42 hours = 32 hours).

39

This estimate is based on the following calculation: 32 hours (mid-point of 21 hours and 42 hours) x $287
(blended rate for a senior systems analyst and senior programmer) = $9,184.

40

This estimate is based on the following calculation: 32 hours x 586 money market funds = 18,752 hours.

41

This estimate is based on the following calculation: $9,184 per fund x 586 money market funds =
$5,381,824.

42

This estimate is based on the following calculation: (41,020 burden hours (year 1) + 18,752 burden hours
(year 2) + 18,752 burden hours (year 3)) ÷ 3 = 26,175 hours.

43

This estimate is based on the following calculation: ($11,807,900 (year 1 monetized burden hours) +
$5,381,824 (year 2 monetized burden hours) + $5,381,824 (year 3 monetized burden hours)) ÷ 3 =
$7,523,849.

20
Commission staff expects that these one-time and ongoing burdens will be substantially similar
to the burdens associated with the proposed requirement regarding website disclosure of daily
liquid assets and weekly liquid assets, discussed above. This is because staff expects the core
activities associated with both of these website disclosure requirements (designing the required
schedule, chart, graph, or other depiction; making necessary software programming changes; and
updating the website disclosure each day) would be identical for each requirement, and expects
that the burdens associated with these activities will not vary substantially based on the substance
of the disclosure necessitated by each requirement. As discussed below, staff believes that funds
will incur no additional burden obtaining current NAV data for purposes of the proposed
requirement regarding website disclosure of the fund’s daily current NAV.
Commission staff expects that each money market fund would incur a one-time burden of
70 hours, 44 at an internal burden cost of $20,150, 45 to design the required schedule, chart, graph,
or other depiction, and to make the necessary software programming changes to the fund’s
website to disclose the fund’s daily current NAV as of the end of each business day during the
preceding six months. Using an estimate of 586 money market funds, Commission staff
estimates that money market funds would incur, in aggregate, a total one-time burden of 41,020
hours, 46 at an internal labor cost of $11,807,900, 47 to comply with these website disclosure
44

Commission staff estimates that the lower bound of the range of the initial, one-time hour burden to design
and present the historical depiction of the fund’s daily current NAV would include the following: 16 hours
(project assessment) + 40 hours (project development, implementation, and testing) = 56 hours.
Commission staff estimates that the upper bound of the range of the initial, one-time hour burden to design
and present the historical depiction of daily liquid assets and weekly liquid assets would include the
following: 24 hours (project assessment) + 60 hours (project development, implementation, and testing) =
84 hours. For purposes of our estimates for the PRA analysis, we have taken the midpoint of the range
discussed above (mid-point of 56 hours and 84 hours = 70 hours).

45

This estimate is based on the following calculations: (20 hours (mid-point of 16 hours and 24 hours for
project assessment) x $290 (blended rate for a compliance manager and a compliance attorney) = $5,800) +
(50 hours (mid-point of 40 hours and 60 hours for project development, implementation, and testing) x
$287 (blended rate for a senior systems analyst and senior programmer) = $14,350) = $20,150 per fund.

46

This estimate is based on the following calculation: 70 hours x 586 money market funds = 41,020 hours.

21
requirements. Commission staff estimates that each fund would incur an annual ongoing burden
of 32 hours, 48 at an internal labor cost of $9,184, 49 to update the depiction of the fund’s daily
current NAV on the fund’s website each business day during that year; in aggregate, staff
estimates that money market funds would incur an ongoing annual burden on 18,752 hours, 50 at
an internal labor cost of $5,381,824, 51 to comply with this disclosure requirement. Amortizing
these hourly and cost burdens over three years results in an average annual increased burden of
26,175 burden hours 52 at an internal labor cost of $7,523,849. 53
iv.

Disclosure of Financial Support Provided to Money Market
Funds

Staff estimates that the Commission would receive 40 reports per year filed in response to
an event specified on Part C (“Provision of financial support to Fund”) of Form N-CR. 54

47

This estimate is based on the following calculation: $20,150 per fund x 586 money market funds =
$11,807,900.

48

Commission staff estimates that the lower bound of the range of the ongoing annual hour burden to update
the required website information would be 21 hours per year (5 minutes per day x 252 business days in a
year = 1,260 minutes, or 21 hours). Commission staff estimates that the upper bound of the range of the
ongoing annual hour burden to update the required website information would be 42 hours per year (10
minutes per day x 252 business days in a year = 2,520 minutes, or 42 hours). For purposes of our estimates
for the PRA analysis, we have taken the mid-point of the range discussed above (mid-point of 21 hours and
42 hours = 32 hours).

49

This estimate is based on the following calculation: 32 hours (mid-point of 21 hours and 42 hours) x $287
(blended rate for a senior systems analyst and senior programmer) = $9,184.

50

This estimate is based on the following calculation: 32 hours x 586 money market funds = 18,752 hours.

51

This estimate is based on the following calculation: $9,184 x 586 money market funds = $5,381,824.

52

This estimate is based on the following calculation: 41,020 burden hours (year 1) + 18,752 burden hours
(year 2) + 18,752 burden hours (year 3) ÷ 3 = 26,175 hours.

53

This estimate is based on the following calculation: $11,807,900 (year 1 monetized burden hours) +
$5,381,824 (year 2 monetized burden hours) + $5,381,824 (year 3 monetized burden hours) ÷ 3 =
$7,523,849.

54

Commission staff estimates this figure based in part by reference to our estimate of the average number of
notifications of security purchases in reliance on rule 17a-9 that money market funds currently file each
year. 21Because money market funds would be required to file a report in response to an event specified
on Part C of Form N-CR if the fund receives any form of financial support from the fund’s sponsor or other
affiliated person (which support includes, but is not limited to, a rule 17a-9 security purchase), staff

22
Because the required website disclosure overlaps with the information that a fund must disclose
on Form N-CR when the fund receives financial support from a sponsor or fund affiliate, we
anticipate that the burdens a fund would incur to draft and finalize the disclosure that would
appear on its website would largely be incurred when the fund files Form N-CR. 55 Commission
staff estimates that a fund would incur an additional burden of 1 hour, at an internal burden cost
of $207, 56 each time that it updates its website to include the new disclosure. Accordingly,
Commission staff estimates that the requirement to disclose information about financial support
received by a money market fund on the fund’s website would result in a total aggregate burden
of 40 hours per year, 57 at a total aggregate internal labor cost of $8,280. 58
Under the proposed floating NAV alternative, in total, that staff estimates that all money
market funds would incur an annual increased burden of 62,730 hours, 59 at an internal labor cost
of $18,335,687 60 to comply with the proposed rule 2a-7 amendments. Staff estimates that our

estimates that the Commission would receive a greater number of Form N-CR Part C reports than the
number of notifications of rule 17a-9 security purchases that it currently receives.
55

See infra section IV.A.4.

56

This estimate is based on the following calculation: 1 hour per website update x $207 per hour for a
webmaster = $207.

57

This estimate is based on the following calculation: 1 hour per website update x 40 website updates made
by money market funds = 40 hours.

58

This estimate is based on the following calculation: 40 hours per year x $207 per hour for a webmaster =
$8,280.

59

This estimate is based on the following calculation: [433 hours (retail exemption) + 244 hours (assetbacked securities) – 35 hours (notice to Commission: 25 + 10) – 155 hours (required procedures) + 2,821
hours (stress testing) + 59,422 (website disclosure: 7,032 + 26,175 + 26,175 + 40)] = 62,730 hours.

60

This estimate is based on the following calculation: [$284,933 (retail exemption) + $313,357 (asset-backed
securities) – $13,265 (notice to Commission: $9,475 + $3,790) – $60,940 (required procedures) +
$1,300,000 (stress testing) + $16,511,602 (website disclosure: $1,455,624 + $7,523,849 + $7,523,849 +
$8,280)] = $18,335,687.

23
proposed amendments to rule 2a-7 under the floating NAV alternative would result in a total
aggregate annual collection of information burden of 579,958 hours. 61
ii.

Liquidity Fees and Gates Proposal
a.

Board Determinations

Under the proposed liquidity fees and gates proposal, if a money market fund’s weekly
liquid assets fall below 15% of total assets, the fund’s board may be required to make and
document a number of determinations, when in the best interest of the fund, regarding the
imposition of liquidity fees and gates, including (i) whether to impose the liquidity fee, and if so,
what the amount of the liquidity fee should be (not to exceed 2%); (ii) whether to impose a
redemption gate; (iii) when to remove a liquidity fee put in place (subject to other rule
requirements); and (iv) when to lift a redemption gate put in place (subject to other rule
requirements). This requirement is a collection of information under the PRA, and is designed to
ensure that a fund that imposes a liquidity fee or gate does so only when, as determined by the
fund’s board, it is in the best interest of the fund to do so. This new collection of information
would be mandatory for money market funds that rely on rule 2a-7, and to the extent that the
Commission receives confidential information pursuant to these collections of information, such
information would be kept confidential, subject to the provisions of applicable law.

Staff analysis of Form N-MFP data shows that, between March 2011 and October 2012,
four prime money market funds had weekly liquid assets below 15% of total assets, the trigger
for board determinations regarding the imposition of liquidity fees and gates. Commission staff
estimates that the four money market funds we estimate would satisfy the triggering event would
spend, on an annual basis, (i) four hours of a fund attorney’s time to prepare materials for the
61

This estimate is based on the following calculation: current approved burden of 517,228 hours + 62,730 in
additional burden hours as a result of the proposed amendments = 579,958 hours.

24
board’s determinations, (ii) two hours for the board to review those materials and make the
required determinations, and (iii) one hour of a fund attorney’s time per year, on average, to
prepare the written records of such determinations. 62 Therefore, staff estimates that the average
annual burden to prepare materials and written records for a board’s required determinations
would be approximately seven hours per fund 63 at an internal labor cost of approximately $9,895
per fund. 64 Therefore, staff estimates the annual burden would be approximately 28 burden
hours 65 and $39,580 in total internal labor costs for all money market funds. 66 Amortized over a
three-year period, this would result in an average annual burden of approximately 9 hours and an
internal labor cost of $13,193 for all funds. 67
b.

Retail Exemption

The Commission is not proposing a retail money market fund exemption from our
liquidity fees and gates proposal. Accordingly, there would be no collection of information
burden related to the retail exemption.
c.

Asset-Backed Securities

As outlined above, we are proposing certain amendments relating to ABS securities that
would be adopted if the first alternative (requiring money market funds to float their NAV per

62

This estimate includes preparing and evaluating materials relevant to the determinations required in
imposing (and removing) either or both liquidity fees and redemption gates.

63

This estimate is based on the following calculation: 4 hours to adopt + 2 hours for board review + 1 hour
for record preparation = 7 hours per year.

64

This estimate is based on the following calculation: [5 hours x $379 per hour for an attorney = $1,895] + [2
hours x $4,000 per hour for a board of 8 directors = $8,000] = $9,895.

65

This estimate is based on the following calculation: 7 burden hours per money market fund x 4 funds = 28
total burden hours.

66

This estimate is based on the following calculation: 4 money market funds x $9,895 in total costs per fund
complex = $39,580.

67

This estimate is based on the following calculation: 28 burden hours ÷ 3 = 9 average annual burden hours;
$39,580 burden costs ÷ 3 = $13,193 average annual burden cost.

25
share) is adopted. The collection of information burdens would be the same under the proposed
liquidity fees and gates alternative. Accordingly, staff estimates that, under the proposed
liquidity fees and gates alternative, all money market funds would incur an aggregate average
annual burden of approximately 244 hours and internal costs of $313,357.
d.

Notice to Commission

As outlined above, we propose to eliminate the requirements that money market funds
provide electronic notice of any event of default or insolvency of a portfolio security and any
purchase by a fund of a portfolio security by an affiliate in reliance on rule 17a-9. We are also
proposing that these amendments would be adopted if the second alternative requiring liquidity
fees and gates is adopted. Accordingly, staff estimates that, under the proposed liquidity fees
and gates alternative, all money market funds would incur an aggregate average annual reduction
in burden of approximately 35 hours and internal cost savings of $13,265.
e.

Stress Testing

As outlined above, we are proposing amendments to the stress testing provision of rule
2a-7 to enhance the hypothetical events for which a fund (or its adviser) is required to test. The
amendments and enhancements we are proposing to the stress testing requirements would largely
be identical under either reform alternative we might adopt, except that for floating NAV money
market funds we would remove the standard to test against preserving a stable share price if we
were to adopt the floating NAV alternative, as discussed above in more detail. Therefore, staff
estimates that the aggregate one-time burden for all money market funds to implement the
proposed amendments to stress testing would be the same as under our floating NAV alternative
(2,821 burden hours and $1.3 million total internal labor cost for all funds.

26
f.

Website Disclosure

Under the liquidity fees and gates proposal, the Commission is proposing four
amendments to the information money market funds are required to disclose on their websites.
These amendments would promote transparency of money market funds’ risks and risk
management by:
• Harmonizing the specific portfolio holdings information that rule 2a-7 currently
requires funds to disclose on the fund’s website with the corresponding portfolio
holdings information proposed to be reported on Form N-MFP;
• Requiring that a fund disclose on its website a schedule, chart, graph, or other
depiction showing the percentage of the fund’s total assets that are invested in
daily and weekly liquid assets, as well as the fund’s net inflows or outflows, as of
the end of each business day during the preceding six months (which depiction
must be updated each business day as of the end of the preceding business day);
• Requiring that a fund disclose on its website a schedule, chart, graph, or other
depiction showing the fund’s daily current NAV per share, as of the end of each
business day during the preceding six months (which depiction must be updated
each business day as of the end of the preceding business day); and
• Requiring a fund to disclose on its website substantially the same information that
the fund is required to report to the Commission on Form N-CR regarding the
provision of financial support to the fund, the imposition and removal of liquidity
fees, and the suspension and resumption of fund redemptions.
This new collection of information would be mandatory for money market funds that rely on rule
2a-7, and to the extent that the Commission receives confidential information pursuant to these

27
collections of information, such information would be kept confidential, subject to the provisions of
applicable law.

i.

Disclosure of Portfolio Holdings Information

As outlined above, we are proposing amendments to the portfolio holdings information
that rule 2a-7 currently requires money market funds to disclose on the fund’s website to
harmonize this information with the corresponding portfolio holdings information proposed to be
reported on Form N-MFP. We are proposing substantially similar amendments under both the
floating NAV alternative and the liquidity fees and gates alternative. Therefore, the burdens
associated with the proposed amendments would be the same as those discussed above (7,032
aggregate hours per year, at a total aggregate internal labor cost of $1,455,624).
ii.

Disclosure of Daily Liquid Assets and Weekly Liquid
Assets
We are proposing to require money market funds to disclose on the fund’s website a
schedule, chart, graph, or other depiction showing the percentage of the fund’s total assets that
are invested in daily and weekly liquid assets, as well as the fund’s net inflows or outflows, and
to update this depiction each business day, as discussed above. We are proposing identical
requirements under both the floating NAV alternative and the liquidity fees and gates alternative.
Therefore, the burdens associated with the proposed requirements would be the same as those
discussed above (26,175 aggregate hours per year, at a total aggregate internal labor cost of
$7,523,849).
iii.

Disclosure of Daily Current NAV

We are proposing to require a money market fund to disclose on the fund’s website a
schedule, chart, graph, or other depiction showing the fund’s daily current NAV as of the end of
the previous business day, and to update this depiction each business day, as discussed above.

28
We are proposing substantially similar requirements under both the floating NAV alternative and
the liquidity fees and gates alternative. Therefore, the burdens associated with the proposed
requirements would be the same as those discussed above (26,175 aggregate hours per year, at a
total aggregate internal labor cost of $7,523,849).
iv.

Disclosure Regarding Financial Support Received by the
Fund, the Imposition and Removal of Liquidity Fees, and
the Suspension and Resumption of Fund Redemptions

As outlined above, we are proposing to require money market fund to disclose on the
fund’s website substantially the same information that the fund is required to report to the
Commission on Form N-CR regarding the provision of financial support to the fund. We are
proposing identical requirements under both the floating NAV alternative and the liquidity fees
and gates alternative. Therefore, the burdens associated with these proposed requirements would
be the same as those discussed above (40 aggregate hours per year, at a total aggregate internal
labor cost of $8,280).
In connection with the fees and gates alternative, we are also proposing to require money
market funds to disclose on the fund’s website substantially the same information that the fund is
required to report to the Commission on Form N-CR regarding the imposition and removal of
liquidity fees, and the suspension and resumption of fund redemptions. Commission staff
estimates that the Commission would receive, in aggregate, an average of 8 reports per year filed
in response to events specified on Part E (“Imposition of liquidity fee”), Part F (“Suspension of
Fund redemptions”), and Part G (“Removal of liquidity fees and/or resumption of Fund
redemptions”) of Form N-CR. 68 Because the required website disclosure overlaps with the

68

This estimate is based on staff’s analysis of Form N-MFP data that shows that, between March 2011 and
October 2012, 4 prime money market funds had weekly liquid assets below 15% at the time of filing. We
assume that the Commission would receive 4 reports on Form N-CR filed in response to events specified
on Part E (which requires filing when the 15% threshold is crossed, regardless of whether the fund imposes

29
information that a fund must disclose on Form N-CR when the fund imposes or removes
liquidity fees, or suspends and resumes fund redemptions, we anticipate that the burdens a fund
would incur to draft and finalize the disclosure that would appear on its website would largely be
incurred when the fund files Form N-CR. Commission staff estimates that a fund would incur an
additional burden of 1 hour, at an internal burden cost of $207, 69 each time that it updates its
website to include the new disclosure. Accordingly, Commission staff estimates that the
requirement to disclose information about the imposition and removal of liquidity fees, and the
suspension and resumption of fund redemptions, on the fund’s website would result in a total
aggregate burden of 8 hours per year, 70 at a total aggregate internal labor cost of $1,656. 71
Under the proposed liquidity fees and gates alternative, in total, that staff estimates that
all money market funds would incur an annual increased burden of 62,469 hours, 72 at an internal
labor cost of $18,126,543 73 to comply with the proposed rule 2a-7 amendments. Staff estimates

the default liquidity fee) and Part F (which requires filing when the 15% threshold is crossed and the fund
imposes a redemption gate). Assuming that each time a fund crosses the 15% threshold, it would impose a
fee or gate, and that it would eventually remove this fee or gate, we assume that the Commission would
additionally receive 4 reports on Form N-CR filed in response to events specified on Part G (which requires
filing when a fund that has imposed a liquidity fee and/or suspended the fund’s redemptions determines to
remove such fee and/or resume fund redemptions).
However, this is a conservative estimate, because we expect that funds would be less likely to cross the
15% threshold if we adopt our proposal, since we expect that the funds would increase their risk
management around their level of weekly liquid assets in response to the fee and gate requirements.
69

This estimate is based on the following calculation: 1 hour per website update x $207 per hour for a
webmaster = $207.

70

This estimate is based on the following calculation: 1 hour per website update x 8 website updates made by
money market funds = 8 hours.

71

This estimate is based on the following calculation: 8 hours per year x $207 per hour for a webmaster =
$1,656.

72

This estimate is based on the following calculation: [9 hours (board determination) + 244 hours (assetbacked securities) – 35 hours (notice to Commission: 25 + 10) + 2,821 hours (stress testing) + 59,430
(website disclosure: 7,032 + 26,175 + 26,175 + 40 +8)] = 62,469 hours.

73

This estimate is based on the following calculation: [$13,193 (board determination) + $313,357 (assetbacked securities) – $13,265 (notice to Commission: $9,475 + $3,790) + $1,300,000 (stress testing) +

30
that our proposed amendments to rule 2a-7 under the proposed liquidity fees and gates
alternative would result in a total aggregate annual collection of information burden of 579,697
hours. 74
iii.

A Note Regarding the Information Collection (IC) Burden worksheet

As noted above, the Commission has proposed two alternative proposals as part of its
money market fund reform package and is waiting to receive comment from the industry before
making a final determination as to which alternative proposal to adopt. Accordingly, for
purposes of the IC burden worksheet, staff is averaging the hour burden under each alternative
proposal and therefore, the average annual time burden is 62,600 hours. 75 Therefore, the total
aggregate annual collection of information burden is 579,828 hours. 76
13.

Estimate of Total Annual Cost Burden

Cost burden is the cost of services purchased to comply with rule 2a-7, such as outside
counsel and third-party service providers. Commission staff does not currently estimate external
cost burdens associated with the proposed amendments to rule 2a-7.
14.

Estimate of Cost to the Federal Government

Rule 2a-7 does not impose any costs on the federal government.

$16,513,258 (website disclosure: $1,455,624 + $7,523,849 + $7,523,849 + $8,280 +$1,656)] =
$18,126,543.
74

This estimate is based on the following calculation: current approved burden of 517,228 hours + 62,469 in
additional burden hours as a result of the proposed amendments = 579,697 hours.

75

This estimate is based on the following calculation: 62,730 annual aggregate burden hours (FNAV
alternative) + 62,469 annual aggregate burden hours (fees and gates alternative) = 125,199 ÷ 2 = 62,600
annual aggregate burden hours.

76

This estimate is based on the following calculation: current approved burden of 517,228 hours + 62,600 in
additional average burden hours as a result of the proposed amendments = 579,828 hours.

31
15.

Changes in Burden
i.

Floating NAV Proposal

The total annual time burden of 579,958 hours represents an increase of 62,730 hours
over the previous burden hour estimate of 517,228 hours. The change in burden hours is due to
the staff’s estimates of the time that would result from our proposed amendments.
ii.

Liquidity Fees and Gates Proposal

The total annual time burden of 579,697 hours represents an increase of 62,469 hours
over the previous burden hour estimate of 517,228 hours. The change in burden hours is due to
the staff’s estimates of the time that would result from our proposed amendments.
iii.

A Note Regarding the IC Burden worksheet

The total annual time burden of 579,828 hours represents an increase of 62,600 hours
over the previous burden hour estimate of 517,228 hours. The change in burden hours is due to
the staff’s estimates of the time that would result from our proposed amendments.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

Not applicable.
18.

Exceptions to Certification Statement

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.