November 6, 1992
TO: SEC RULES MEMBERS NO. 58-92
MONEY MARKET FUNDS AD HOC COMMITTEE NO. 9-92
RE: SEC STAFF LETTER ON TECHNICAL ISSUES UNDER RULE 2a-7
__________________________________________________________
In response to a request by the Institute, the Division of
Investment Management issued a letter clarifying a technical
issue under Rule 2a-7 under the Investment Company Act, which
governs the regulation of money market funds. Copies of the
Institute’s letter and the staff’s response are attached.
In its response, the staff clarified the treatment and
analysis under Rule 2a-7 of securities subject to guarantees or
other forms of unconditional credit support provided by issuers
that themselves have outstanding short-term debt. In analyzing
the application of Rule 2a-7 to five different scenarios
involving such securities, the staff concluded that in
determining the status of these securities under the Rule, a fund
could rely on the ratings of the outstanding short-term debt of
the issuer of the unconditional credit support or could disregard
the existence of the credit support and treat the security as
unrated.
Amy B.R. Lancellotta
Associate Counsel
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