The AMF consults on a stricter classification for money market funds and new requirements on investor disclosures and product marketing.
The AMF consults on a stricter classification for money market funds and new requirements on investor disclosures and product marketing.
Stricter classification for money market funds
The proposal is to maintain a single category, "money market fund", but to restrict the universe of assets in which these funds can invest. The following requirements would be added to the existing criteria for classification in the "money market" category:
- a money market fund cannot hold securities with a maturity of more than two years;
- the average maturity of the securities held by the fund cannot exceed one year;
- exposure to credit risk must be compatible with the low level of overall risk taken on by a money market fund.
Interim measures regarding the entry into force of the maturity requirements are proposed.
Enhanced and clarified investor disclosures
Since the investment horizon in a money market fund can range from a few days to several months, investors must be given information that allows them to distinguish between the different types of fund.
Accordingly, it is proposed that:
- the prospectus should provide standardised information enabling easy identification of funds that are suitable for a short-term investment;
- it should not include generalities, either about a fund's assets or about its strategies, that do not make it possible to identify the real performance drivers of the fund or the related risks.
Stricter marketing conditions
Regarding the marketing of money market funds, the AMF's existing "money market" classification should be the main reference. If a proprietary classification were to be used, however, it should avoid names or terms that could confuse investors, and the term "money market" should be reserved solely for funds meeting AMF criteria for that asset class.
Given that information must be "fair, clear and not misleading", a money market fund cannot be portrayed as totally risk-free. Marketing actions must not veil the fact that riskless returns do not exist; they must also make it clear that a fund offering returns in excess of the money market interest rate corresponding to the recommended investment period, minus management fees, is inevitably riskier than a fund that confines itself to that return.
Deadline for responses is 15 April 2009.
Press release
© AMF - Autorité des Marchés Financiers
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article