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Home Viewpoints

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Avoiding Disclosure Overload in Fund Financial Statements

By Gregory Smith

September 28, 2012

Shareholders of SEC-registered investment companies regularly receive detailed financial statements, a key part of the disclosure regime that produces transparency for fund investors. A recent proposal from the Financial Accounting Standards Board (FASB) could layer unnecessary requirements onto those statements. We’ve just filed a comment letter with FASB to register our concerns with the proposed requirements, which would apply to all companies. Our comments reflect our concern that the proposal doesn’t consider the extensive disclosures SEC-registered funds already provide.

One new requirement would be the addition of an “available liquid funds table,” showing a fund’s unencumbered cash, high-quality liquid assets, and borrowing availability. Funds, however, already must include in their financial statements a comprehensive schedule of investments that lists securities by type, combined with subtotals and percentage relative to net assets. This listing provides fund financial statement users with a complete understanding of available liquid funds. Thus, in our view, this table would be redundant.

Moreover, the high degree of portfolio liquidity mandated for open-end funds—which must stand ready to redeem fund shares and pay redemption proceeds within seven days of a redemption request—further limits the utility of the available liquid funds table.

We also have concerns with another proposed table, one that would present information on liabilities and other cash flow obligations. For many funds, such as index and money market funds, cash flow obligations typically are very small relative to total net assets. For others, more significant cash flow obligations may arise from short sales, derivatives transactions, or the purchase of securities on a when-issued basis.

A fund should not be required to include the proposed cash flow obligations table if it has no material cash flow obligations. In our letter, we recommend that FASB consider a framework for assessing whether a fund should provide this table. The framework we envision would be similar to that currently used by funds to assess whether they must present a statement of cash flows in their financial statements.

This approach would avoid funds providing disclosure that would be of little or no value to financial statement users, while ensuring that funds with significant cash flow obligations would provide the proposed disclosure.

Gregory Smith is senior director, fund accounting and compliance at ICI.

TOPICS: Operations and Technology

Washington Post Column Repeats Money Market Fund Myths

By Ianthé Zabel

September 28, 2012

A recent column published by the Washington Post unfortunately repeats misperceptions and falsehoods about money market funds.

Read more…

TOPICS: Money Market Funds

ICI Responds to Geithner Letter to FSOC on Money Market Funds

By Ianthe Zabel

September 27, 2012

Today, ICI President and CEO Paul Schott Stevens made the following comment in response to a letter from U.S. Treasury Secretary Timothy Geithner to the members of the Financial Stability Oversight Council about proposed money market fund regulations.

Read more…

TOPICS: Fund RegulationMoney Market Funds

U.S. Prime Money Market Funds Remain Cautious with Respect to Eurozone Holdings

By Emily Gallagher and Chris Plantier

September 21, 2012

Over the summer, prime money market funds marginally increased their holdings of eurozone issuers: from 12.2 percent of assets in June (chart) to 14.0 percent of assets in August. This increase was driven primarily by a rise in holdings of French assets (up to 5.1 percent from 4.3 percent in June) and in holdings of German assets (up to 5.1 percent from 4.1 percent in June).

Read more…

TOPICS: Financial MarketsMoney Market Funds

Achieving Real Consensus on Money Market Funds

By Paul Schott Stevens

September 21, 2012

We are disappointed to see Securities and Exchange Commission Chairman Mary L. Schapiro (“In the Money-Market for More Oversight,” Wall Street Journal, Sept. 20) recycling the same arguments already rejected by the majority of her Commission colleagues as a basis for imposing so-called structural changes on money market funds. A “substantial consensus” exists, she argues, in favor of these changes—a consensus of bank regulators, pundits, and journalists.

Read more…

TOPICS: Money Market Funds

401(k) Plans: Key in Helping Americans Achieve Secure Retirement

By Paul Schott Stevens

September 19, 2012

I submitted the following letter to the New York Times in response to a recent column on 401(k) plans:

The recent article, “Should the 401(k) be Reformed or Replaced” (Business Day, September 11), asks the wrong question.

401(k) plans play a key role in helping Americans achieve a secure retirement. 401(k)s have a remarkable track record of success in providing Americans incentives to save, invest, and think long-term. As of March 2012, Americans held $3.4 trillion in 401(k) plans.

Read more…

TOPICS: 401(k)Retirement Policy

Ensuring Effective and Reasonable Data Collection on 529 Plans

By Tamara K. Salmon

September 17, 2012

The Municipal Securities Rulemaking Board (MSRB) has proposed a regulation that would increase the amount of information it collects on 529 educational savings plans. ICI supports the MSRB’s goal of having the information it needs to carry out its oversight responsibilities. However, we have serious concerns about this particular proposal. The MSRB must strike a careful balance to ensure that it receives meaningful information without imposing unreasonable requirements on those complying with the rules. We’ve recently expressed this view, along with several recommendations for the proposal, in a letter to the MSRB.

Read more…

TOPICS: Fund Regulation

Clearing Away the Misconceptions About Money Market Funds

By Paul Schott Stevens

September 10, 2012

A recent New York Times column contains a slew of mischaracterizations regarding recent developments around money market funds.

Read more…

TOPICS: Money Market Funds

Creating Derivatives Rules That Work Globally

By Jennifer S. Choi and Giles Swan

September 5, 2012

Derivatives—which include instruments such as options, futures, and swaps—are important portfolio management tools for funds worldwide, providing options and flexibility to fund managers as they carry out investment strategies and manage risks.

Read more…

TOPICS: Fund Regulation

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