ICI Supports Amendments to Financial Responsibility Rules for Broker-Dealers

Washington, DC, June 18, 2007 - The Investment Company Institute supports the SEC's proposal to expand the use of money market funds under the SEC's broker-dealer financial responsibility rules.

Background

In March 2007, the Commission requested comment on proposed amendments to the Commission's net capital, customer protection, books and records, and notification rules for broker-dealers under the Exchange Act. Specifically, the proposed amendments are designed to address several emerging areas of concern regarding the financial requirements for broker-dealers. They also would update the financial responsibility rules and make certain technical amendments.

ICI Position
The Institute supports the SEC's amendments and, in particular, strongly supports the proposal to extend to a broker-dealer's investments in shares of certain types of money market funds equivalent treatment to their direct investments in U.S. Treasury securities. In a recent comment letter, ICI recommends that such treatment be extended to money market funds that invest exclusively in "first tier" securities as defined in Rule 2a-7 under the Investment Company Act of 1940. ICI further recommends changes to the conditions to be considered a "qualified security" under the proposal. Finally, the Institute recommends that the haircut that broker-dealers would apply to proprietary positions in money market funds be reduced.

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