SEC Shadow NAV rule means greater transparency for investors
The Securities and Exchange Commission (SEC) has announced that, for the first time, investors can access detailed information that money market funds file with the Commission - including information about a fund's investments and the market-based price of its portfolio known as its "shadow NAV" (net asset value) or mark-to-market valuation.
The information is available on the SEC's Web site and will be updated monthly with a 60-day delay after the end of the month to which the information pertains. The information will be available in both a readable format in which information corresponds to the items on the form, and the data format the fund used to submit the information to the SEC (eXtensible Markup Language or "XML").
As part of its overhaul of money market fund regulation, the SEC last year adopted a rule requiring money market funds to file information about their holdings and portfolio valuations.
"While the Commission uses this information in its real-time oversight of money market funds, we also believe that public disclosure can provide investors and market analysts with useful insight for their evaluation of these funds," said SEC Chairman Mary L. Schapiro.
Funds began filing the information on the SEC's new Form N-MFP in December. Because of the 60-day delay, this initial collection of information will appear on the SEC Web site March 1. It is important to remember that the shadow price NAV shown on publicly available Form N-MFP information is at least 60 days old and is likely not the fund's current shadow price NAV.
The reporting rule also requires money market funds to post more current but less detailed portfolio information on their own Web sites within five business days after the end of the month.
This ruling is part of the money market fund reform that was announced by the SEC last year. The ruling was designed to tighten the risk-limiting conditions of rule 2a-7 by, among other things, requiring funds to maintain a portion of their portfolios in instruments that can be readily converted to cash, reducing the maximum weighted average maturity of portfolio holdings, and improving the quality of portfolio securities; require money market funds to report their portfolio holdings monthly to the Commission; and permit a money market fund that has "broken the buck" (i.e., re-priced its securities below $1.00 per share), or is at imminent risk of breaking the buck, to suspend redemptions to allow for the orderly liquidation of fund assets. The amendments are designed to make money market funds more resilient to certain short-term market risks, and to provide greater protections for investors in a money market fund that is unable to maintain a stable net asset value per share.