April 28, 1994
TO: MONEY MARKET FUNDS AD HOC COMMITTEE NO. 11-94
RE: REVISED DRAFT LETTER ON PROPOSED AMENDMENTS TO RULE 2a-7
__________________________________________________________
Attached is a revised draft comment letter on the proposed
amendments to Rule 2a-7.
The most significant change in this version of letter pertains
to the proposed credit quality standards for tax-exempt funds.
Instead of recommending that the Commission adopt the Institute's
1991 recommendation (i.e., that tax-exempt funds be subject to the
five percent limit on second tier securities applicable to taxable
funds, so long as the treatment of split-rated securities is
modified), as we did in our earlier draft, the letter recommends
that the Commission adopt the quality requirements proposed for
national funds and that they be extended to single state funds.
This would allow funds to invest without limitation in second tier
securities, except that investments in second tier "conduit
securities" would be subject to a five percent limit. In
connection with this proposal, we recommend that single state funds
also be subject to a five percent per issuer limitation with
respect to investments in second tier traditional securities.
In connection with our recommendation, we would like input on
whether we should: (a) offer as a fall back position a twenty-five
percent limit on investments in second tier securities (up to five
percent of which could be invested in second tier conduit
securities), as set forth in brackets on pp. __ in the draft
letter; (b) include such a twenty-five percent limit as part of our
proposal, instead of as a fall back position; or (c) not propose
any limit on investments in second tier traditional municipal
securities, either as a fall back or as part of our proposal.
Comments on the proposed amendments are due to the SEC by May
6, 1994. Therefore, please provide me with your comments on the
draft letter by close of business on Tuesday, May 3, 1994. My
direct number is 202/326-5824 and the fax number is 202/326-5828 .
Amy B.R. Lancellotta
Associate Counsel
Attachment