When the SEC divided MMFs into "government", "retail", and "institutional", it added gating requirements to prevent or slow down possible runs on MMFs. Good thought, poor design. AFAIK, no fund ever actually imposed these restrictions, though they updated their prospectuses to allow them.
As of Oct 2, funds are no longer allowed to even suggest they might do this. They are required to:
remove the ability for a fund board to temporarily suspend redemptions if the fund's liquidity falls below a threshold. In addition, the [SEC regulation] amendments will remove the tie between liquidity thresholds and the potential imposition of liquidity fees."
Final RuleFor example, from Schwab:
"As of October 2, 2023, the prospectuses for the Schwab Money Funds were updated to remove language tied to redemption gates, thresholds, and liquidity fees."
I've sent a note to Fidelity, as it has not updated its prospectuses. Pragmatically, this doesn't make a difference. However, its legal department seems out to lunch. I'll see what response I get.
Comments
"The amendments will also require certain money market funds to implement a liquidity fee framework that will better allocate the costs of providing liquidity to redeeming investors."
Unlike the removal of the old gating/fee requirement (which must have been done by Oct 2), the "compliance date for the mandatory liquidity fee framework [] is twelve months after the effective date (Oct 2) of the final amendments."
https://www.federalregister.gov/d/2023-15124/p-840
Right now, gates are ended, the old redemption fees are ended, and any new liquidity fees are yet to be implemented.
If we're looking at the future, I'm more concerned with the increase in the liquid asset requirement from 10% to 25% (daily liquidity) and from 30% to 50% (weekly liquidity).
https://www.federalregister.gov/d/2023-15124/p-453
That could make any future redemption fees moot, but also reduce the yield of MMFs. That will take effect six months from now.
https://www.federalregister.gov/d/2023-15124/p-848
There is another set of rules for discretionary redemption fees. These may be imposed only if the fund board deems the fee to be in the best interest of the fund. Which fund sponsor is going to be first to say that it is in the best interest of a fund to impose a redemption fee?
Once the sponsor does that, its MM fund business is shot - not just the fund in question but its whole stable. On reputation, even if the short term decision is correct.
Unfortunately, I was a bit too tactful in my note. I indicated that the Federal Register reports that a prospectus is change required by the SEC not later than Oct 2. I asked when I might expect to see an updated prospectus. The response was that when prospectuses are updated, clients are notified and can find them online. Also, that this should happen "soon".
So I just sent a followup: thanks, but my concern is about the prospectuses being out of compliance. All of the top ten families (by AUM of MMFs) have created supplements or issued new prospectuses except Fidelity. I offered Fidelity an out: maybe I misread, or maybe its old prospectus actually does comply (it doesn't).
I concluded: Help me understand. Or perhaps I should ask the SEC since it's their rule.
Maybe that will get some attention.
Top MMF managers
https://www.financialresearch.gov/money-market-funds/
N-MFP: Monthly Schedule of Portfolio Holdings of Money Market Funds (PDF)
N-PORT: Monthly Portfolio Investments Report (PDF)
As you said, nothing to do with prospectuses.
Updates to Fidelity's website do not inform all of Fidelity's investors of changes. Fidelity MMF investors also invest via third parties (e.g. WellsTrade, Merrill). They see the unamended SEC filings.