Exemptive Order (11-25-15)

Federal Register / Vol. 80, No. 227 / Wednesday, November 25, 2015 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.54
Brent J. Fields,
Secretary.
[FR Doc. 2015–29926 Filed 11–24–15; 8:45 am]
BILLING CODE 8011–01–P

SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76480; File No. S7–08–14]

Order Granting a Conditional
Exemption Under the Securities
Exchange Act of 1934 From the
Confirmation Requirements of
Exchange Act Rule 10b–10(a) for
Certain Transactions in Money Market
Funds
November 19, 2015.

I. Introduction
On July 23, 2014, the Securities and
Exchange Commission (‘‘Commission’’)
published a notice requesting comment
on a proposal to grant a conditional
exemption to broker-dealers, subject to
certain conditions, from the immediate
confirmation requirements of Rule 10b–
10 of the Securities Exchange Act of
1934 (‘‘Exchange Act’’) for transactions
effected in shares of institutional prime
money market funds.1 Concurrent with
the issuance of the Notice, the
Commission adopted amendments to
Rule 2a–7 of the Investment Company
Act of 1940 (‘‘Investment Company
Act’’) 2 that, among other things, require
institutional prime money market
funds 3 to sell and redeem fund shares
based on the current market-based value
of the securities held in their portfolios
(i.e., transact at a ‘‘floating’’ net asset
value (‘‘NAV’’)).4 The Commission
received two comments in response to
the Notice.5 After careful consideration
54 17

CFR 200.30–3(a)(12).
Notice of Proposed Exemptive Order
Granting Permanent Exemptions Under the
Securities Exchange Act of 1934 from the
Confirmation Requirements of Exchange Act Rule
10b–10 for Certain Money Market Funds, Exchange
Act Release No. 72658 (July 23, 2014), 79 FR 44076
(July 29, 2014) (‘‘Notice’’).
2 17 CFR 270.2a–7.
3 ‘‘Institutional prime money market funds’’ are
money market funds operating in accordance with
Investment Company Act Rule 2a–7(c)(1)(ii), which
include funds that are often referred to as (i) ‘‘tax
exempt’’ or (ii) ‘‘municipal’’ funds that do not
qualify as a ‘‘retail money market fund’’ as defined
in Rule 2a–7(a)(25).
4 See Money Market Fund Reform; Amendments
to Form PF, Securities Act Release No. 9616,
Investment Advisers Act Release No. 3879,
Investment Company Act Release No. 31166 (July
23, 2014), 79 FR 47736, at section III.B (Aug. 14,
2014) (‘‘Money Market Fund Reform Adopting
Release’’).
5 See Letters to Kevin M. O’Neill, Deputy
Secretary, Commission, from J. Charles Cardona,

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1 See

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the Commission is granting the
proposed exemption pursuant to
Exchange Act Section 36(a) 6 and Rule
10b–10(f),7 and providing certain
clarifications to address comments
received.
II. Proposal for Exemptions Pursuant to
Notice
Exchange Act Rule 10b-10(a)
generally requires broker-dealers to
provide customers with specified
information relating to their securities
transactions at or before the completion
of the transactions.8 Rule 10b-10(b),
however, provides an exception from
this requirement for certain transactions
in money market funds that attempt to
maintain a stable NAV when no sales
load or redemption fee is charged.9 The
exception permits broker-dealers to
provide transaction information to
money market fund shareholders on a
monthly, rather than immediate, basis,
subject to the conditions set forth in
paragraphs (2) and (3) of Rule 10b–
10(b).10 Accordingly, customers
President, The Dreyfus Corporation (Aug. 19, 2014)
(‘‘Dreyfus Letter’’), http://www.sec.gov/comments/
s7-08-14/s70814-2.pdf; and Dorothy Donohue,
Acting General Counsel, Investment Company
Institute (Aug. 15, 2014) (‘‘ICI Letter’’), http://
www.sec.gov/comments/s7-08-14/s70814-1.pdf.
6 Section 36(a) of the Exchange Act generally
authorizes the Commission to conditionally or
unconditionally exempt any person, security, or
transaction, or any class or classes of persons,
securities, or transactions, from certain provisions
of the Exchange Act or certain rules or regulations
thereunder, by rule, regulation, or order, to the
extent that such exemption is necessary or
appropriate in the public interest, and is consistent
with the protection of investors. 15 U.S.C. 78mm.
7 Exchange Act Rule 10b–10(f) provides that the
Commission may conditionally or unconditionally
exempt any broker or dealer from the requirements
of paragraphs (a) and (b) of Rule 10b–10 with regard
to specific transactions or specific classes of
transactions for which the broker or dealer will
provide alternative procedures to effect the
purposes of the rule. 17 CFR 240.10b–10(f).
8 17 CFR 240.10b–10(a).
9 17 CFR 240.10b–10(b).
10 With respect to such money market funds,
Exchange Act Rule 10b–10(b)(2) requires a brokerdealer to give or send to a customer within five
business days after the end of each monthly period:
A written statement disclosing, each purchase or
redemption, effected for or with, and each dividend
or distribution credited to or reinvested for, the
account of such customer during the month; the
date of such transaction; the identity, number, and
price of any securities purchased or redeemed by
such customer in each such transaction; the total
number of shares of such securities in such
customer’s account; any remuneration received or
to be received by the broker or dealer in connection
therewith; and that any other information required
by [Rule 10b–10(a)] will be furnished upon written
request: Provided, however, that the written
statement may be delivered to some other person
designated by the customer for distribution to the
customer. 17 CFR 240.10b–10(b)(2). Exchange Act
Rule 10b–10(b)(3) requires the customer to be
provided with prior notification in writing
disclosing the intention to send the written
information referred to in Rule 10b–10(b)(1) in lieu

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historically have received information
about their transactions in shares of
money market funds, including
institutional prime money market funds,
on a monthly basis.
Given that share prices of institutional
prime money market funds likely will
fluctuate under the Commission’s
amendments to Investment Company
Act Rule 2a–7,11 absent an exemption,
broker-dealers would not be able to
continue to rely on the exception under
Exchange Act Rule 10b–10(b) for
transactions in money market funds
operating in accordance with Rule 2a–
7(c)(1)(ii).12 Instead, broker-dealers
would be required to provide immediate
confirmations for such transactions in
accordance with Rule 10b–10(a).
To address the potential burdens
created by such a requirement, the
Commission published the Notice
proposing to exempt broker-dealers
from the requirements of Exchange Act
Rule 10b–10(a) when effecting
transactions in money market funds
operating in accordance with
Investment Company Act Rule 2a–
7(c)(1)(ii), for or with the account of a
customer, where: (i) no sales load is
deducted upon the purchase or
redemption of shares in the money
market fund, (ii) the broker-dealer
complies with the provisions of Rule
10b–10(b)(2) and Rule 10b–10(b)(3) that
are applicable to money market funds
that attempt to maintain a stable NAV
referenced in Rule 10b-10(b)(1),13 and
(iii) the broker-dealer has notified the
customer of its ability to request
delivery of an immediate confirmation
consistent with the written notification
requirements of Exchange Act Rule 10b–
of an immediate confirmation. 17 CFR 240.10b–
10(b)(3).
11 17 CFR 270.2a–7.
12 See generally Money Market Fund Reform;
Amendments to Form PF, Securities Act Release
No. 9408, Investment Advisers Act Release No.
3616, Investment Company Act Release No. 30551
(June 5, 2013), 78 FR 36834, 36934 (June 19, 2013);
see also Exchange Act Rule 10b–10(b)(1), 17 CFR
240.10b-10(b)(1) (limiting alternative monthly
reporting to money market funds that attempt to
maintain a stable NAV).
As adopted, government and retail money market
funds are exempt from the Investment Company
Act Rule 2a–7(c)(1)(ii) floating NAV requirement,
and therefore, will continue to maintain a stable
NAV. See Money Market Fund Reform Adopting
Release, supra note 4, at sections III.C.1 and III.C.2.
Accordingly, for investor transactions in the exempt
funds, broker-dealers would continue to qualify for
the exception under Rule 10b–10 and be permitted
to send monthly transaction reports.
13 The proposed conditions under ‘‘(i)’’ and ‘‘(ii)’’
are consistent with the confirmation delivery
requirements in Exchange Act Rule 10b–10(b) for
all transactions in investment company securities
that attempt to maintain a stable NAV where no
sales load or redemption fee is charged. 17 CFR
240.10b–10(b).

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Federal Register / Vol. 80, No. 227 / Wednesday, November 25, 2015 / Notices

10(a) and has not received such a
request from the customer.
III. Comments on Proposal
The Commission received two
comments on the Notice, both
expressing general support for the
proposal.14 However, both commenters
requested clarification regarding the
third condition, which would require a
broker-dealer to notify its customer of
the customer’s ability to request
delivery of an immediate confirmation
consistent with the written notification
requirements of Exchange Act Rule 10b–
10(a). Specifically, commenters
questioned whether the notification may
be made on a one-time basis or whether
it would need to be made on a
transaction-by-transaction basis.15 In
response, the Commission is clarifying
that these notifications may be made on
a one-time basis.

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IV. Discussion of the Exemption
The Commission finds that it is
necessary and appropriate in the public
interest, and consistent with the
protection of investors to allow brokerdealers, subject to certain conditions, to
provide transaction information to
investors in any money market fund
operating pursuant to Rule 2a–7(c)(1)(ii)
on a monthly basis in lieu of providing
immediate confirmations as required
under Exchange Act Rule 10b–10(a). In
making this finding, the Commission
considered several factors, as discussed
more fully below as well as in the
Notice.
First, the attributes of institutional
prime money market funds mitigate the
need for the protections intended by
confirmation delivery under Rule 10b–
10(a).16 For example, institutional prime
money market funds will continue to be
subject to the ‘‘risk limiting’’ provisions
of Rule 2a–7, including those provisions
governing the credit quality, liquidity,
diversification, and maturity of fund
investments.17 Under those ‘‘risk
limiting’’ provisions, mutual funds that
hold themselves out as money market
funds—including institutional prime
money market funds—may acquire only
investments that are short-term, highquality, dollar-denominated
instruments.18 As a result, while the
prices of institutional prime money
market funds likely will fluctuate, they
are not likely to exhibit regular day-today fluctuations, primarily due to the
14 See

Dreyfus Letter; ICI Letter, supra note 5.
Letter, at 1; ICI Letter, at 2.
16 See Notice, 79 FR at 44077.
17 Investment Company Act Rule 2a–7(d), 17 CFR
270.2a–7(d) (risk-limiting conditions).
18 Id.; see also Money Market Fund Reform
Adopting Release, 79 FR at 47775.
15 Dreyfus

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high quality and short duration of these
funds’ underlying portfolio securities.19
Second, customers that need daily
pricing information may obtain it
through means other than confirmation
statements.20 For example, under the
fund disclosure requirements of
Investment Company Act Rule 2a–
7(h)(10)(iii), customers—including
institutional investors—will be able to
access an institutional prime money
market fund’s daily mark-to-market
NAV per share through the fund’s Web
site.21
Third, absent an exemption, brokerdealers are likely to incur significant
costs associated with providing
immediate, rather than monthly,
confirmations for transactions in shares
of institutional prime money market
funds. Such costs, in turn, would likely
be passed along to investors.22
However, given that there likely will
be some price fluctuations in
institutional prime money market funds,
the Commission believes that it is also
necessary and appropriate in the public
interest and consistent with the
protection of investors to condition the
exemption on a broker-dealer providing
immediate confirmations upon a
customer’s request. Accordingly, to be
eligible for the exemption, a brokerdealer must (1) provide an initial
written notification to the customer of
its ability to request delivery of
immediate confirmations consistent
with the written notification
requirements of Exchange Act Rule 10b–
10(a), and (2) not receive any such
request from the customer.23 In
addition, consistent with conditions
applicable to confirmation delivery
requirements provided in Exchange Act
Rule 10b–10(b) for all transactions in
investment company securities that
attempt to maintain a stable NAV where
no sales load or redemption fee is
charged, the Commission is imposing
the conditions that no sales load is
19 Money

Market Fund Reform Adopting Release,
79 FR at 47779 n.491.
20 Id., at section III.E.9.c; see also Notice, 79 FR
at 44078.
21 17 CFR 270.2a–7(h)(10)(iii).
22 An analysis of the costs and benefits of
providing immediate trade confirmations
requirements under Rule 10b–10 with respect to
institutional prime money market funds is
discussed in the Money Market Fund Reform
Adopting Release. See Money Market Fund Reform
Adopting Release, 79 FR at 47785–86; Notice, 79 FR
at 44077–78.
23 This Order has been modified from the
proposal to specify that, to meet the notification
condition, the broker-dealer must provide an
‘‘initial written notification to the customer of such
account.’’ The condition was modified to clarify
that the notification may be made on a one-time
basis for each applicable account and not on a
transaction-by-transaction basis.

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deducted upon the purchase or
redemption of shares in the institutional
prime money market fund, and that the
broker-dealer complies with the
provisions of paragraphs (2) and (3) of
Rule 10b–10(b) that are applicable to
money market funds that attempt to
maintain a stable NAV referenced in
Rule 10b–10(b)(1).
V. Conclusion
In light of the above, and in
accordance with Exchange Act Section
36 24 and Rule 10b–10(f),25 the
Commission finds that conditionally
exempting broker-dealers from the
requirements of Exchange Act Rule 10b–
10(a) for transactions in institutional
prime money market funds is necessary
and appropriate in the public interest,
and consistent with the protection of
investors.
Therefore, it is hereby ordered,
pursuant to Section 36 of the Exchange
Act and Exchange Act Rule 10b–10(f),
that broker-dealers shall be exempt from
the written notification requirements
under Exchange Act Rule 10b–10(a)
when effecting transactions in money
market funds operating in accordance
with Investment Company Act Rule 2a–
7(c)(1)(ii), for or with the account of a
customer, where: (i) No sales load is
deducted upon the purchase or
redemption of shares in the money
market fund, (ii) the broker-dealer
complies with the provisions of Rule
10b–10(b)(2) and Rule 10b–10(b)(3) that
are applicable to money market funds
that attempt to maintain a stable NAV
referenced in Rule 10b–10(b)(1), and
(iii) the broker-dealer has provided an
initial written notification to the
customer of such account of its ability
to request delivery of immediate
confirmations consistent with the
written notification requirements of
Exchange Act Rule 10b–10(a) and has
not received such a request from the
customer.
VI. Paperwork Reduction Act
This Order contains ‘‘collection of
information requirements’’ within the
meaning of the Paperwork Reduction
Act of 1995 (‘‘PRA’’). The Commission
has submitted the information to the
Office of Management and Budget
(‘‘OMB’’) for review in accordance with
44 U.S.C. 3507 and 5 CFR 1320.10. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a current valid control number.
The title of this collection is ‘‘Money
Market Fund Reform/Exchange Act Rule
24 15
25 17

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Federal Register / Vol. 80, No. 227 / Wednesday, November 25, 2015 / Notices
10b–10.’’ We are applying for a new
OMB Control Number for this collection
in accordance with 44 U.S.C. 3507(j).
A. Summary of Collection of
Information
In addition to the conditions typically
applicable under Rule 10b–10(b),26
under the terms of this Order, to be
exempt from the immediate
confirmation requirements of Exchange
Act Rule 10b–10(a) for purposes of an
institutional prime money market fund,
a broker-dealer must also (1) notify the
customer of its ability to request
delivery of an immediate confirmation,
consistent with the written notification
requirements of Rule 10b–10(a), and (2)
not receive any such request from the
customer.27 The condition of notifying
the customer of its ability to request
delivery of an immediate confirmation
creates a burden under the PRA, and
must be satisfied by sending a
notification to a customer on a one-time
basis for each applicable account.
B. Proposed Use of Information
The notification condition in this
Order will alert customers of their
ability to request immediate
confirmations, consistent with the terms
of Exchange Act Rule 10b–10(a). The
notification condition allows customers
to obtain immediate confirmations
should they choose to request them.
C. Respondents

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As stated in the Money Market Fund
Reform Adopting Release, based on
FOCUS report data as of December 31,
2013, the Commission estimates that
there are approximately 320 brokerdealers that clear customer transactions
or carry customer funds and
securities.28 In the Money Market Fund
Reform Adopting Release, the
Commission also conservatively
26 The Commission has previously estimated the
PRA burdens associated with providing immediate
confirmations and/or monthly statements to
customers under Rule 10b–10 regarding securities
transactions, including money market funds. See
Submission for OMB Review; Comment Request, 78
FR 39023 (June 28, 2013). That submission,
however, does not address the PRA burden
associated with the notification condition set forth
in this Order.
27 If the conditions of this Order are satisfied,
broker-dealers will be eligible to provide monthly
statements for transactions in institutional prime
money market funds in lieu of the immediate
confirmation requirements of Exchange Act Rule
10b–10(a)—as has historically been the case for
money market funds prior to the adoption of the
money market fund reform amendments. When
requested by a customer, the broker-dealer would
be required under this Order to provide immediate
confirmations in accordance with Exchange Act
Rule 10b–10(a).
28 Money Market Fund Reform Adopting Release,
79 FR at 47785 & n.563.

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estimated that those broker-dealers are
the respondents that would provide
trade confirmations to customers in
institutional prime money market
funds.29
D. Total Burden Estimates Relating to
This Order
The Commission estimates that the
initial one-time burden required to
implement, modify, or reprogram
existing systems to generate and
transmit the required notifications to
customers would be 36 hours for each
of the 320 broker-dealers that clear
customer transactions or carry customer
funds and securities.30 Thus, the
Commission estimates that the initial
burden for issuance of the notifications
in accordance with this Order,
including burdens to implement,
modify, or reprogram existing systems
to generate such notifications will be
approximately 11,520 burden hours.31
The Commission anticipates that after
broker-dealers incur the initial costs to
establish systems to generate and
transmit the notifications to existing
customers, broker-dealers will be able to
minimize any additional costs, such as
by providing the notifications as part of
a new account application.32 As a result,
the Commission anticipates that any
additional annual burdens arising from
the notification condition will be
minimal,33 and conservatively estimates
that broker-dealers will, on average,
incur annual costs of 5% of those initial
costs, or 576 burden hours.34
E. The Collection of Information Is
Required To Obtain a Benefit
The collection of information results
from a condition of this Order and will
29 Id.
30 In the Money Market Fund Reform Adopting
Release, the Commission estimated that the initial
one-time burden to implement, modify, or
reprogram existing systems to generate immediate
confirmations (rather than monthly statements)
would be 355 burden hours for each of the 320
broker-dealers that clear customer transactions or
carry customer funds and securities. Id. at 47785 &
n.562. Given the non-repeat nature of the
notification requirement and substantial savings in
resources noted by commenters, the Commission
estimates that the burdens to develop system
changes to provide the notices to all applicable
customers would be no more than 10% of the prior
355 burden hours estimate associated with
requiring immediate confirmations.
31 This estimate is based on the following: 36
hours × 320 firms = 11,520 hours.
32 See, e.g., ICI Letter, supra note 5, at 2.
33 As stated, supra note 26, other than the
notification condition set forth in this Order, the
Commission has previously estimated the
additional burdens associated with providing
immediate confirmations and/or monthly
statements under Rule 10b-10. See Submission for
OMB Review; Comment Request, 78 FR 39023 (June
28, 2013).
34 This estimate is based on the following: 11,520
hours × 5% = 576 hours.

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be required for a broker-dealer to be
exempt from the immediate
confirmation requirements of Exchange
Act Rule 10b–10(a).
F. Confidentiality
The notification would be provided
by a broker-dealer directly to a customer
and thus would not be kept
confidential.
G. Request for Comment
Pursuant to 44 U.S.C. 3506(c)(2)(A),
the Commission solicits comment to:
1. Evaluate whether the proposed
collection is necessary for the proper
performance of our functions, including
whether the information shall have
practical utility;
2. Evaluate the accuracy of our
estimate of the burden of the proposed
collection of information;
3. Determine whether there are ways
to enhance the quality, utility, and
clarity of the information to be
collected; and
4. Evaluate whether there are ways to
minimize the burden of collection of
information on those who are to
respond, including through the use of
automated collection techniques or
other forms of information technology.
Persons submitting comments on the
collection of information requirements
should direct them to the Office of
Management and Budget, Attention:
Desk Officer for the Securities and
Exchange Commission, Office of
Information and Regulatory Affairs,
Washington, DC 20503, and should also
send a copy of their comments to Brent
J. Fields, Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090, with
reference to File No. S7–08–14.
Requests for materials submitted to
OMB by the Commission with regard to
this collection of information should be
in writing, with reference to File No.
S7–08–14, and be submitted to the
Securities and Exchange Commission,
Records Management, Office of Filings
and Information Services, 100 F Street
NE., Washington, DC 20549. As OMB is
required to make a decision concerning
the collections of information between
30 and 60 days after publication in the
Federal Register, a comment to OMB is
best assured of having its full effect if
OMB receives it within 30 days of
publication.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015–29928 Filed 11–24–15; 8:45 am]
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