In July 2014, the U.S. Securities and Exchange Commission (SEC) issued new rules for further regulation of money market mutual funds. The SEC also announced that there will be a multi-year implementation period for these rules.
Upon implementation, the rules will reflect new definitions for government funds and retail funds, and will require institutional prime (general purpose) and institutional municipal money market mutual funds to price and transact at a "floating" net asset value (NAV). During periods of extraordinary market stress, under the new rule, both retail and institutional prime and municipal money market mutual funds may charge shareholders liquidity fees, payable to the fund upon redemption, as well as provide for redemption gates that temporarily would halt all withdrawals. Government and U.S. Treasury money market mutual funds will not be subject to any of the new structural changes.
Since the SEC announced these new regulations, we have spent significant time reviewing the rules and listening to our investors' preferences.
At Fidelity, we remain committed to offering a variety of investment options and will continue to have a robust product lineup that includes retail and institutional prime and municipal money market mutual funds, along with U.S. Treasury and government money market mutual funds.
Many investors have told us that they want access to money market mutual funds with a stable NAV that will not be subject to liquidity fees or redemption gates, which would restrict their use of these funds. In response to those preferences, we are announcing the first set of proposed changes to certain of our money market mutual funds, which are designed to align our product offerings to best meet investors' future needs.
Key changes include our plan to amend the investment policies on our government and U.S. Treasury money market mutual funds to reflect that these funds already meet the new SEC requirement to invest at least 99.5% of their assets in cash, government securities, and/or repurchase agreements that are fully collateralized. We are also proposing to convert several of our prime money market mutual funds to government money market mutual funds. Additionally, to strengthen and simplify our money market mutual fund product lineup, we are proposing to merge several funds that have similar investment strategies. In connection with these mergers and conversions, we also plan to change the names of certain funds.
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Affected money market funds
- Investment Policy Changes—No Shareholder Action: In the first quarter, these Fidelity U.S. Treasury and government money market mutual funds will notify shareholders of their amended investment policies that match the new SEC definition of government funds. No shareholder action is required.
- Fund Mergers—No Shareholder Action: In the first quarter, these Fidelity money market mutual funds will notify their shareholders of merger plans. No shareholder action is required.
- Conversion of Prime Funds to Government Funds—Shareholder Vote to Approve Change: In March 2015, these Fidelity prime money market mutual funds will send proxy voting materials to shareholders, which will include voting instructions. Shareholders are requested to follow the instructions in those materials to vote (electronically, by mail, or using a telephone number that will be provided in their instructions).
- Fund Mergers—Shareholder Vote to Approve Merger: In March 2015, these Fidelity money market mutual funds that are merging will send proxy voting materials to shareholders. Shareholders are requested to follow the instructions in those materials to vote (electronically, by mail, or using a telephone number that will be provided in their instructions).
We will continue to listen to our investors as we approach the final date for money market mutual fund regulatory implementation in October 2016.
In the future, we expect to announce which money market mutual funds will be classified as retail funds, and which will be considered institutional funds under the SEC's new rules. As market conditions and investor preferences evolve, we will continue to review our money market mutual fund lineup to ensure that we are meeting investors' needs.
All of the changes described have been approved by the Board of Trustees of each affected fund. Some of these changes will take a number of months to implement and some proposals will require fund shareholder approval. Investors in funds whose changes require shareholder approval can expect to receive proxy materials in March 2015.
We are well-prepared for the new rules. With this initial set of proposed changes, we are evolving our product offerings and fund operations to comply with these rules and meet investor needs. We know that money market mutual funds are very important to many investors and these funds will continue to be an integral part of our business.
Fidelity will continue to keep investors informed about these changes and if approved, how they will affect shareholders of these funds. Investors can find an overview of the new SEC rules and the types of money market mutual funds in these key resources.