February 27, 1996
TO: MONEY MARKET FUNDS AD HOC COMMITTEE No. 2-96
SEC RULES COMMITTEE No. 15-96
RE: INSTITUTE LETTER ON PROPOSED REVISIONS TO PSA MASTER
REPURCHASE AGREEMENT
______________________________________________________________________________
The Public Securities Association ("PSA") has proposed revisions to its Master
Repurchase Agreement (the "Agreement") to reflect significant legal developments and changes
in the marketplace since the Agreement was last amended in 1987. The Institute submitted the
attached letter on the proposed revised Agreement. A copy of the draft revised Agreement is
also attached.
The Institutes letter recommends that an annex be added to the Agreement with terms
and conditions appropriate for use in repos involving investment companies. A draft of such
an annex is included in the letter. The provisions in the proposed investment company annex
are intended generally to address the minimum regulatory requirements that investment
companies must satisfy when engaging in repo agreements. Thus, investment companies
frequently may wish to add additional provisions to the annex tailored to their own needs and
circumstances. By way of example, footnote 4 of the letter notes that many fund complexes
have obtained exemptive relief to enter into repo transactions through pooled accounts. In
those instances, supplemental provisions may be appropriate in addressing, among other
things, the margin maintenance provisions of paragraph 4 of the revised Agreement. We are
interested in members views on whether the Institute should develop a standardized
provision dealing with repos involving funds joint trading accounts for supplemental
submission to the PSA and, if so, what the provision should include.
The letter also suggests several changes to the Agreement that would apply to repos
involving all parties, not just investment companies. In an effort to keep the letter brief and
focused primarily on the proposed investment company annex, the Institute only commented
on those provisions in the Agreement that raised issues of significant concern. Accordingly, the
letter does not comment on many of the other provisions in the Agreement, including the
proposed schedule and annexes thereto. If you have comments on the Agreement that were
not included in the Institutes letter that you would like us to consider raising with the PSA,
please provide them to me by March 16, 1996. My direct number is 202/326-5824.
Amy B.R. Lancellotta
Associate Counsel
Attachments