US SEC approves sweeping amendments to rules governing money market funds

Purpose – To explain the background and details and to discuss the implications of the USA Securities and Exchange Commission’s (SEC’s) July 23, 2014 amendments to Rule 2a-7 and other rules that govern money market funds under the Investment Company Act of 1940. Design/methodology/approach – Explains the background, including problems during the financial crisis, the USA Treasury’s temporary guarantee program in 2008, earlier SEC proposals, and the USA Financial Stability Oversight Council’s recommendations. Details the amendments to Rule 2a-7, including the authorization to impose liquidity fees and redemption gates, the floating net asset value (NAV) requirement, the impact of the amendments on unregistered money funds operating under Rule 12d1-1, guidance on fund valuation methods, disclosure requirements, requirements for money fund portfolios to be diversified as to issuers of securities and guarantors, stress testing requirements, and compliance dates. Findings – The Amendments set forth sweeping changes to money fund regulation and will have a profound effect on the money fund industry. Although the most significant provisions of the Amendments – the floating NAV requirement and the imposition of liquidity fees and redemption gates – will not go into effect for two years, the changes to the industry will be apparent almost immediately. Practical implications – Money fund managers and boards of directors should begin assessing the potential impact of the Amendments and develop a schedule to come into compliance. Originality/value – Practical guidance from experienced financial services lawyers.

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SEC staff issues money market fund reform frequently asked questions

Journal of Investment Compliance ◽

10.1108/joic-08-2015-0059 ◽

2015 ◽

Vol 16 (4) ◽

pp. 47-54 ◽

Cited By ~ 1

Author(s):

Jack Murphy ◽

Brenden Carroll ◽

Stephen Cohen ◽

Joshua Katz ◽

Justin Goldberg

Keyword(s):

Financial Services ◽

Boards Of Directors ◽

Decimal Place ◽

Money Market ◽

Securities And Exchange Commission ◽

Content Type ◽

Fund Managers ◽

Money Market Funds ◽

Fund Industry ◽

To Come

Purpose – To explain the background and details of the responses from the Staff of the Division of Investment Management of the US Securities and Exchange Commission (SEC) to certain frequently asked questions (FAQs) regarding the July 23, 2014 amendments to Rule 2a-7 and other rules that govern money market funds under the Investment Company Act of 1940 (1940 Act). Design/methodology/approach – In July 2014, the SEC adopted sweeping amendments to Rule 2a-7 and other rules that govern money market funds under the 1940 Act (Amendments). The Amendments (i) require “institutional” money funds to operate with a floating net asset value (NAV), rounded to the fourth decimal place (e.g. $1.0000) and (ii) permit (and, under certain circumstances, require) all money funds to impose a “liquidity fee” (up to 2 per cent) and/or “redemption gate,” once weekly liquidity levels fall below the required regulatory threshold. The article briefly discusses the background and the events leading up to the FAQs and describes key responses from the Staff on a variety of issues. Findings – The Amendments set forth sweeping changes to money fund regulation and will have a profound effect on the money fund industry. Although the most significant provisions of the Amendments – the floating NAV requirement and the imposition of liquidity fees and redemption gates – will not go into effect for two years, the changes to the industry will be apparent almost immediately. The FAQs provide clarity on a number of issues that are relevant to the money fund industry. Practical implications – Money fund managers and boards of directors should begin assessing the potential impact of the Amendments and develop a schedule to come into compliance. Originality/value – Practical guidance from experienced financial services lawyers.

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Portfolio diversification during monetary loosening policy

The Journal of Risk Finance ◽

10.1108/jrf-08-2014-0121 ◽

2015 ◽

Vol 16 (2) ◽

pp. 197-214

Author(s):

Kamil Makiel

Keyword(s):

Financial Stability ◽

Mining Industry ◽

Portfolio Risk ◽

New Approach ◽

Content Type ◽

Market Portfolio ◽

The Us ◽

The Usa ◽

The Impact ◽

A Company

Purpose – The purpose of the paper is to analyze the impact of quantitative easing (QE) performed in the USA on relationship between assets mainly from mining and oil industries. Based on the empirical results, the method of diversified portfolio creation has been proposed. Design/methodology/approach – Nine DCC-GARCH-type models have been estimated for each group centered around a main asset: a company from the oil or mining industry, the appropriate currency pair for its market of origin, commodities which could be used for the diversification of risk involved in investing in a portfolio containing the company, and the largest company from the same industry listed on the US market. Each series of conditional correlations was analyzed with regard to the changes that occurred during the various stages of QE. Findings – The correlations are shown to be stabilizing in the successive stages of QE. The most significant changes in the distribution of correlations can be observed after the first stage of QE. The effects of QE are evident not only in the USA but also in other countries; however, the level of its influence varies between different markets and assets. It is possible to diversify the inflation, currency and market portfolio risk by appropriately chosen asset decomposition. Research limitations/implications – The DCC model is limited, so to provide more precise results, more sophisticated models can be estimated and compared. Practical implications – The paper investigate the fact of stabilization in financial markets relations. The findings may prove the validity of continuation of QE. A portfolio creation method has been proposed – it has been stated that including commodity in portfolio is more appropriate then only-bond–equity mix. Originality/value – The new approach of analyzing financial stability has been proposed – the control for stability of conditional correlation.

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SEC adopts rules and forms to modernize reporting requirements for registered investment companies

Journal of Investment Compliance ◽

10.1108/joic-02-2017-0012 ◽

2017 ◽

Vol 18 (1) ◽

pp. 25-42

Author(s):

Stephen Cohen ◽

Megan Johnson ◽

Gary Brooks ◽

Brooke Higgs

Keyword(s):

Financial Services ◽

Service Providers ◽

Securities And Exchange Commission ◽

Content Type ◽

Fund Managers ◽

Investment Companies ◽

Reporting Requirements ◽

Final Rule ◽

The Impact ◽

Practical Implications

Purpose To explain the new rules, forms, and amendments to current rules and forms (Final Rule) that the Securities and Exchange Commission (SEC) has adopted to modernize the reporting of information provided by registered investment companies (funds) and to improve the quality and type of information that funds provide to the SEC and investors. Design/methodology/approach Discusses the background leading up to the Final Rule, provides an overview and summary of the Final Rule’s key components, and highlights issues that may be raised by the new reporting regime. Findings The Final Rule will have a significant effect on many funds. Funds will experience a substantially increased reporting burden with respect to both the frequency of reporting and the granularity of information required. Practical implications Fund managers and fund service providers should begin to evaluate the impact of the Final Rule, the processes that will need to be implemented to prepare filings on new forms, and the changes in fund disclosure practices that will be required in response to the amendments to certain forms. Originality/value Practical guidance from financial services lawyers specializing in the investment management industry.

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Groups, social processes and decision making in finance

Qualitative Research in Financial Markets ◽

10.1108/qrfm-08-2017-0073 ◽

2019 ◽

Vol 11 (4) ◽

pp. 429-455 ◽

Cited By ~ 2

Author(s):

Alexandru Preda ◽

Gulnur Muradoglu

Keyword(s):

Decision Making ◽

Social Interactions ◽

Social Processes ◽

Individual Investors ◽

Content Type ◽

Financial Decisions ◽

Fund Managers ◽

The Usa ◽

The Uk ◽

The Impact

Purpose This paper aims to investigate a double puzzle, empirical and theoretical. Empirically, can the authors document the influence of groups on financial decisions in investments and trading? Theoretically, if decisions in a group context can be documented, how can we account for them, against the background of the normative models, according to which financial decisions are individualized and atomized? Based on interviews and ethnographic observations with fund managers, analysts and traders, the authors document here decision-making in finance. Theoretically, the authors argue that financial decisions can be explained if, in addition to cognitive processes, the authors take into account the impact of social interactions on the decision-making process. Social interactions are not restricted to imitation processes, and can be seen here as the efforts deployed by decision-makers at maintaining and managing the context of their decisions. The authors present and discuss empirical evidence and argue that the study of social interactions can productively contribute to understanding how decisions are made in finance. Design/methodology/approach The data analyzed here have been gathered between 2001 and 2011, and include: interviews with investment professionals (fund managers and analysts) from the UK and Turkey; interviews with individual investors from the UK and the USA; and observations with individual investors from the UK and the USA. This captures decision activities conducted in different regulatory frameworks of those countries. The authors focussed in the interviews on general decision-making practices. Findings Conclusion the authors have sought to answer a double puzzle, empirical and theoretical. Empirically, the puzzle is how investors and traders resort to groups in their decision-making. Theoretically, the puzzle consists not only in providing an explanation for such processes but also in taking into account that they do not fit the normative models of decisions in mainstream finance. The argument has been that in addition to the cognitive processes identified and discussed in behavioural finance, the authors need to take into account the impact of social processes as well. Social processes include the efforts deployed by financial decision-makers at maintaining and managing the contexts within which decisions are made. The work of context maintenance is intrinsic to the logic of decision-making. The authors have identified, documented and discussed here the social dynamics in financial decisions with respect to performance, managing group relationships and possible conflicts. Originality/value Managing relationships within groups is not without consequences with regard to trading decisions. Oftentimes, avoiding group conflicts – or being confronted with them – leads to decisional adjustments, which have less to do with returns on trades than with the necessity of accommodating social relationships. As several of the interviewees emphasized, making decisions implies consensus and reaching consensus requires accommodating relationships.

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The Securities and Exchange Commission (“SEC”) prevails in the second circuit in defending its no-admission settlement policy

Journal of Investment Compliance ◽

10.1108/joic-09-2014-0039 ◽

2014 ◽

Vol 15 (4) ◽

pp. 41-43

Author(s):

Terence Healy ◽

Amy J. Greer ◽

Daniel Z. Herbst

Keyword(s):

Financial Services ◽

Federal District ◽

Securities And Exchange Commission ◽

District Court ◽

Content Type ◽

Court Of Appeals ◽

Court Judge ◽

The Usa ◽

Settlement Policy ◽

The Impact

Purpose – To explain the impact of a recent decision by the USA Court of Appeals for the Second Circuit on the SEC’s “neither admit nor deny” practice on SEC enforcement matters after the practice was called into question by a federal district court judge. Design/methodology/approach – Explains the background on the practice of no-admission, the challenge by Judge Rakoff to the practice, and the ruling of the Second Circuit and its practical approach on enforcement matters. Findings – The ruling should resolve much of the uncertainty that has surrounded court approval of SEC settlements since Judge Rakoff’s decision to question the practice of no-admit or deny settlements. However, recent comments from SEC Chair Mary Jo White and Senior Enforcement Staff suggest that the SEC may continue to seek admissions in certain cases. Originality/value – Practical guidance from experienced securities and financial services lawyers.

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Harnessing Whales: The Role Of Shadow Price Disclosure In Money Market Mutual Fund Reform

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v11i4.7747 ◽

2013 ◽

Vol 11 (4) ◽

pp. 187

Author(s):

Larry G. Locke ◽

Ethan Mitra ◽

Virginia Locke

Keyword(s):

Mutual Fund ◽

Financial Stability ◽

Shadow Price ◽

Money Market ◽

Securities And Exchange Commission ◽

Shadow Prices ◽

Font Size ◽

Money Market Funds ◽

Fund Industry ◽

The Impact

The money market mutual fund industry is experiencing a sea change. Thanks, in large part, to their role in the 2008 market break, U.S. securities regulators have targeted money market funds for a structural overhaul. Runs on money market funds by institutional investors in the wake of the Lehman Brothers bankruptcy weakened the short-term credit market to the point of collapse. The resulting intervention of the Federal Reserve and the Treasury may have saved the economy from further damage but came at such a perceived cost that legislation now forbids it. Both the Securities and Exchange Commission (SEC) and the Financial Stability Oversight Council (FSOC) believe restructuring is necessary. Their only question appears to be exactly what form the product will take. One of the elements being considered in the reform effort will be increased disclosure of money market fund shadow prices. The regulators have posited that more frequent and more available disclosure of fund shadow prices will lead to more discipline being exerted on the fund industry, especially by the institutional market. A revamped disclosure regime, however, has been in effect since monthly shadow price disclosures were imposed by the SEC in December 2010. This study looks at the impact of those 2010 disclosure regulations on different sectors of the market. It seeks to identify a correlation between shadow prices and changes in assets for both retail and institutional funds. The authors assess the findings of the study and discuss the implications of those findings for the impending regulatory restructuring.

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A consideration of the impact of the Companies and Allied Matters Act (1990) and the Insurance Act (2003) on the board of insurance companies in Nigeria. Part 1

International Journal of Law and Management ◽

10.1108/17542430910988928 ◽

2009 ◽

Vol 51 (5) ◽

pp. 336-358 ◽

Cited By ~ 4

Author(s):

Fidelis Ogbuozobe

Keyword(s):

Corporate Governance ◽

Financial Services ◽

Insurance Companies ◽

Financial Services Industry ◽

Content Type ◽

Governance Practices ◽

Effective Performance ◽

The Usa ◽

Services Industry ◽

The Impact

PurposeThis paper (which is Part 1 of 2) seeks to explore the development and implementation of good corporate governance in the financial services industry in Nigeria.Design/methodology/approachThe paper reflects upon the identification of current problems and official legislative responses in Nigeria and tests the policy and theory against actual responses and practices.FindingsWith the collapse of such mega companies as Enron in the USA and the near‐collapse symptoms observed in such a relatively big company as Cadbury Nigeria, such research as this, on the issue of compliance or otherwise with corporate governance practices by organizations, could not have been undertaken at a more appropriate time than now. Considering the ever‐increasing scope and complexity of the subject, which cannot be covered by a single project, the particular focus here is on the impact of the Companies and Allied Matters Act (1990) and the Insurance Act (2003) on the Boards of insurance companies in Nigeria. In other words, do the said statutes contain sufficient provisions and sanctions to ensure effective performance by Boards of insurance companies in Nigeria?Originality/valueWhile this research paper may not claim to fill this gap completely, it is hoped that it will create sufficient awareness to serve as a springboard for effective entrenchment and enforcement of corporate governance practices in the Nigerian financial services industry (including insurance) in particular and the economy in general.

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Behavior of investor flows in Israeli provident funds

International Journal of Managerial Finance ◽

10.1108/ijmf-08-2018-0247 ◽

2019 ◽

Vol 16 (3) ◽

pp. 334-356

Author(s):

Ofer Arbaa ◽

Eva Varon

Keyword(s):

Poor Performance ◽

Fixed Effect ◽

Fund Flows ◽

Past Performance ◽

Content Type ◽

Fund Managers ◽

The Usa ◽

And Performance ◽

The Impact ◽

Provident Fund

Purpose The purpose of this paper is to study the sensitivity of provident fund investors to past performance and how market conditions, changes in risk and liquidity levels influence the net flows into provident funds by using a unique sample from Israel. Design/methodology/approach The study checks the impact of different levels of fund performance on provident fund flows using three alternative proxies for performance: raw return and the risk adjusted returns based on the Sharpe ratio and the Jensen’s α. The analysis relies on the time fixed effect and fund fixed effect regression models. Findings Results reveal that there exists an approximately concave flow–performance relationship and performance persistence among Israeli provident funds. Israeli provident fund investors are risk averse so they overreact to bad performance both in bull and bear markets. Moreover, liquidity is an important factor to influence the flow–performance curve. The investors’ strong negative response to poor performance and relative insensitivity to outperformance show that provident fund managers are not rewarded for their risk-shifting activities as in mutual funds. Originality/value The authors explore the behavior of investor flows in non-institutional retirement savings funds specifically outside of the USA, which is a topic not properly investigated in literature. Moreover, examining inflows and outflows separately gives the authors a richer understanding of investors in pension schemes. This study also enhances the understanding of the impact of fund liquidity on the flow–performance relationship for the retirement funds segment.

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The impact of labor freedom on geographic cost of living differentials

Journal of Entrepreneurship and Public Policy ◽

10.1108/jepp-d-17-00015 ◽

2017 ◽

Vol 6 (3) ◽

pp. 385-395

Author(s):

Richard Cebula ◽

James E. Payne ◽

Donnie Horner ◽

Robert Boylan

Keyword(s):

Labor Market ◽

State Level ◽

The State ◽

Annual Data ◽

Significant Finding ◽

Cost Of Living ◽

Content Type ◽

The Usa ◽

The Cost ◽

The Impact

Purpose The purpose of this paper is to examine the impact of labor market freedom on state-level cost of living differentials in the USA using cross-sectional data for 2016 after allowing for the impacts of economic and quality of life factors. Design/methodology/approach The study uses two-stage least squares estimation controlling for factors contributing to cost of living differences across states. Findings The results reveal that an increase in labor market freedom reduces the overall cost of living. Research limitations/implications The study can be extended using panel data and alternative measures of labor market freedom. Practical implications In general, the finding that less intrusive government and greater labor freedom are associated with a reduced cost of living should not be surprising. This is because less government intrusion and greater labor freedom both inherently allow markets to be more efficient in the rationalization of and interplay with forces of supply and demand. Social implications The findings of this and future related studies could prove very useful to policy makers and entrepreneurs, as well as small business owners and public corporations of all sizes – particularly those considering either location in, relocation to, or expansion into other markets within the USA. Furthermore, the potential benefits of the National Right-to-Work Law currently under consideration in Congress could add cost of living reductions to the debate. Originality/value The authors extend the literature on cost of living differentials by investigating whether higher amounts of state-level labor market freedom act to reduce the states’ cost of living using the most recent annual data available (2016). That labor freedom has a systemic efficiency impact on the state-level cost of living is a significant finding. In our opinion, it is likely that labor market freedom is increasing the efficiency of labor market transactions in the production and distribution of goods and services, and acts to reduce the cost of living in states. In addition, unlike previous related studies, the authors investigate the impact of not only overall labor market freedom on the state-level cost of living, but also how the three sub-indices of labor market freedom, as identified and measured by Stansel et al. (2014, 2015), impact the cost of living state by state.

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Policy and institutions facilitating entrepreneurial spin-offs: USA, Asia and Europe

Journal of Entrepreneurship and Public Policy ◽

10.1108/jepp-04-2013-0013 ◽

2014 ◽

Vol 3 (2) ◽

pp. 186-196 ◽

Cited By ~ 13

Author(s):

Rosa Caiazza ◽

David Audretsch ◽

Tiziana Volpe ◽

Julie Debra Singer

Keyword(s):

Institutional Setting ◽

Policy Debate ◽

Content Type ◽

Factors Affecting ◽

Institutional Settings ◽

The Usa ◽

New Perspective ◽

National Analysis ◽

The Impact ◽

Cross National

Purpose – Existing work documents the role that institutional setting plays in the process of spin-off creation. However, despite decades of studies, scholars have not clearly explained why some regions are more involved in spin-off activity than others. Drawing from institutional theory, the purpose of this paper is to compare different institutional settings identifying factors affecting the general environment capability to support spin-off activity of a specific region. Design/methodology/approach – The authors utilize a cross-national analysis of American, Asian, and European areas identifying factors affecting their different rate of spin-off activity. This study contributes to the policy debate concerning entrepreneurship and how best to spur spin-off activities. Findings – In this paper, the authors identify the general and specific factors that explain the cross-national diversity in spin-off creation. The authors then perform an analysis of the impact of these factors in various regions of the USA, Asia, and Europe, providing evidence for the necessity of specific combinations of these factors. Originality/value – The paper offers a new perspective on the causes of spin-offs through a cross-national analysis of many areas around the world.

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