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Fidelity battles new SEC rules

Fidelity Investments has filed a new letter with federal securities regulators, further pressing its case against new rules governing money market mutual funds.

Boston-based Fidelity is the nation’s largest manager of money market funds, with $430 billion in accounts used by individuals and institutions for the safekeeping of cash. The firm, in a detailed submission to the Securities and Exchange Commission, argues that reforms undertaken in 2010, after the financial crisis, are enough to ensure the safety of money market funds.

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Commenting on a November study by the SEC, Fidelity said the report data “supports excluding Treasury, government and tax-exempt money market mutual funds from any further reform.”

In addition, Fidelity suggested that within the category of “prime” money market funds — those used widely by institutions — differences between the way large investors and individuals cash out of funds should be examined further before imposing new rules.

The SEC stepped up its scrutiny of money market funds in 2008, when panicked investors sought to get access to their most readily available cash, straining the system. One fund, the Reserve Primary Fund, actually “broke the buck,” meaning its standard share value dropped below $1 because of holdings in the failed Lehman Bros. brokerage.

In 2010, the federal agency required money markets to invest in more liquid, or easy-to-sell, assets and also called for greater transparency. Fidelity and other firms say added rules could hurt the business.

Earlier this month, Fidelity and other financial companies said they would start voluntarily disclosing the actual daily value of their money market fund shares, while still selling them at $1 per share. Actual prices should vary only slightly from $1 — by fractions of a penny.

‘It is critical that any new proposals be based on data and facts that are accurate . . . and that any reforms apply only to the appropriate universe of funds.’

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In its letter, Fidelity said money market mutual funds are now “more resilient and additional reform is not necessary.” But if regulators continue to explore additional reforms, the company said, “it is critical that any new proposals be based on data and facts that are accurate and complete and that any reforms apply only to the appropriate universe of funds.”

Beth Healy can be reached at
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