RegAlert1995-05-26
Added · Updated
SEC Division of Investment Management staff letter: Investment Company Institute
The Division of Investment Management states that the implementation of the T+3 settlement standard under Rule 15c6-1 does not change the liquidity standard for mutual funds, which remains based on Section 22(e) of the Investment Company Act of 1940. Although the 15% illiquid asset limit does not apply to money market funds, they are restricted to holding no more than 10% of net assets in illiquid securities. Funds are advised to assess their portfolio holdings, cash reserves, and credit facilities to ensure they can facilitate compliance with the T+3 standard for brokers and dealers. The Division will monitor industry experience with T+3 and may revisit the issue if necessary.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
DIVISION OF
INVESTMENT MANAGEMENT
. May 26, 1995
Paul Schott Stevens, Esq.
AfJ re -1 ()
Investment Company Institute
Genera Counsel
SEON ~L)
1401 H Street, N.W. RULE
Washigton, D.C. 20005
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Dea Mr. Stevens:
As you know, Rule 15c6-1 under the Securities Exchange Act of 1934, which wil become effective ealy next month, establishes three business days ("T+3") as the stadad settlement period for securities trdes effected by a broker or deaer. II The Investment Company Institute has requested the views of the Division of Investment Management regarding the implications of the T+3 stadad in determing whether a security held by a mutual fund should be deemed to be liquid for purposes of the Commission's restrctions on mutual funds' holdigs of ilquid securities. In paricular, the Institute has asked whether the Division would deem a security with a demand feature that does not entitle the holder to receive the pricipal amount of the underlying security withi three days to be an ilquid
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