New SEC Money Market Fund Reforms
August 24, 2015 – Update
Like others in the industry, we are adapting our money market products to respond to the changing regulatory environment. We recognize that investors may look to money funds for liquidity, convenience and price stability. As a result, we plan to offer only government and retail money market funds that seek to maintain a stable $1 net asset value (NAV).
Money market reform: How our funds line up
The changes we are implementing are outcomes of money market regulations the Securities and Exchange Commission (SEC) enacted last year which are designed to make money market funds more resilient for investors. The rules include the potential to suspend redemptions for 10 days and/or apply redemption fees in some funds so they can better withstand market crises.
The chart below outlines our money market funds and the changes we’re making.
|Capital Preservation Fund||Premium Money Market Fund5 (new name U.S. Government Money Market Fund)2||Prime Money Market Fund3||California Tax-Free Money Market Fund3||Tax-Free Money Market Fund3|
|Investment Objective||Maximum safety and liquidity||Current income while maintaining liquidity and capital||High current income while preserving capital||Safety of principal and current income, and exempt from federal and California income taxes||Safety of principal and current income, exempt from federal income taxes|
|Fund Changes||None||Fund changes effective 12/1/15 (pending proxy)||Institutional accounts will need to exchange to an appropriate money market fund or liquidate4|
|Stable $1 NAV||Yes||Yes||Yes||Yes||Yes|
|Ability to Implement Redemption Fees, Liquidity Gates||No||No||Yes. If needed, the boards will have the ability to impose a liquidity fee or suspend redemptions in times of severe market stress.|
|Eligible Shareholders||Retail and Institutional||Retail and Institutional||Retail||Retail||Retail|
What you can expect
- All clients in Premium Money Market Fund5 – If you were a shareholder of this fund on August 10, 2015, you can expect proxy materials in late August. Please vote no matter how large or small your holdings. Your vote counts.
- Clients in the Capital Preservation Fund – No action needed.
- Clients in Prime Money Market Fund, California Tax-Free Money Market Fund and Tax-Free Money Market Fund4 – If the funds are held in a retail account, no action is needed. If the funds are held in an institutional account, we will be reaching out to your firm over the next year to help you understand the compliance requirements and how to comply.
The SEC rule changes were intended to further enhance the resiliency of money market funds. We believe this peace of mind is important to our clients. Thank you for your business.
2 Shareholders as of August 10, 2015, are being asked to vote on two proposals that would convert our Premium Money Market Fund into a government money market fund. If the proxy is approved, the conversion of the fund is expected to be effective December 1, 2015 and the fund’s name would change to U.S. Government Money Market Fund.
3 We anticipate changes to these funds will be effective in the fall of 2016.
4 The SEC defines retail accounts as those where a natural person (e.g., an individual with a social security number) makes decisions about the account. The SEC defines accounts where a non-natural person is the decision maker (e.g., a corporation with an EIN) as institutional accounts.Institutional account holders will need to exchange to an appropriate money market or liquidate as described above.
On or about August 24, 2015, we mailed a proxy statement to shareholders of record as of August 10, 2015, and filed it with the SEC. We urge investors to read the proxy statement because it contains important information. The proxy statement and other relevant documents will be available free of charge on the SEC’s website at www.sec.gov or by calling 1-800-345-2021. The proxy statement will also be available on American Century Investments’ website.
July 28, 2014 – Update
The Securities and Exchange Commission (SEC) adopted rule changes on July 23 designed to make money market funds more resilient for investors. These rules, where applicable, will be implemented over the next two years. There is no immediate change to money market fund regulations or to our money market funds.
The new rules, built upon reforms adopted in 2010,* state:
- Institutional prime money market funds must move to a floating net asset value (NAV). This allows the daily share prices of these funds to fluctuate along with changes in the market.
- Money market funds may suspend redemptions for a period of 10 days and apply redemption fees to prevent a run on the fund(s). These are referred to in the rules as redemption gates and liquidity fees.
The chart below outlines potential impacts to our money market funds.
Money Market Fund
|Floating NAV||Redemption Gates &
|Capital Preservation Fund||Exempt from new floating NAV requirements – This fund invests at least 99.5% in U.S. government securities and cash. We anticipate that the fund will continue to maintain a stable $1 NAV.||Exempt from new regulation requiring mandatory imposition of liquidity fees –The fund’s board may impose discretionary redemption gates and/or liquidity fees in times of severe market stress.|
Prime Money Market Fund
U.S. Government Money Market Fund5
Tax-Free Money Market Fund
California Tax-Free Money Market Fund
|No immediate impact to these funds – We are currently evaluating the application of the rules. If changes are needed, we will communicate promptly as needed.||Subject to the mandatory 1% liquidity fee – This fee is only required in the most severe circumstances. The funds’ board would have the option to impose discretionary redemption gates and/or liquidity fees in times of severe market stress.|
What you can expect
We are currently analyzing the impact of the new requirements and will provide information to clients very soon. If any product changes are required, they will be promptly communicated well in advance of their effective date to allow time for consideration and planning.
*In March 2010, the SEC set daily and weekly liquidity requirements designed to make all money funds more resilient to investor redemptions. We track and monitor these levels carefully on a daily basis. The recent rule changes are intended by the SEC to further enhance the resiliency of money market funds by giving them additional tools to safeguard the funds’ liquid assets.
July 23, 2014
The Securities and Exchange Commission (SEC) voted today and passed reforms that will change how some money market funds operate. These reforms will be phased in over the next couple of years.
Your money market account is not subject to the reforms at this time.
We are reviewing the new regulations now and will keep you updated as we determine what this means to money market products and your account(s).
We've fully implemented previous reforms seeking to protect money market shareholders and are committed to always acting in your best interest. Since introducing the oldest Treasury money market fund more than 40 years ago, we've managed our money market funds using a disciplined investment process and stringent credit standards.
Check back on americancentury.com for the latest information from us. Also, you can find specifics about the reforms at sec.gov.
On December 1, 2015, the Premium Money Market Fund changed its name to the U.S. Government Money Market Fund.
The disclosure below applies to the California Tax-Free Money Market Fund, Prime Money Market Fund and the Tax-Free Money Market Fund:
Money Market Fund: You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
The disclosure below applies to the Capital Preservation Fund and the U.S. Government Money Market Fund:
Money Market Fund: You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.