More On Legal & Compliancefrom The Advisor's Professional Library
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients transactions. If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
Market participants are objecting to a proposal by Moody’s Investor Service to rate money market funds by factoring in a fund sponsor’s ability and willingness to support a “distressed fund”—that is, a fund that’s about to “break the buck” or is in financial distress.
Last September, Moody’s originally proposed that the sole determinant it would use in rating a money market fund would be based on a fund sponsor’s ability and willingness to support a distressed fund. But after receiving negative feedback on its proposal—including comments from Federal Reserve Board Chairman Ben Bernanke—Moody’s decided to revise its proposal.
In its revised proposal, released on Jan. 18, 2011, Moody’s “opted to lessen the impact that would be placed on fund sponsor support,” in determining a money market fund’s rating, says Jacob Nygren, a manager with Treasury Strategies in Chicago. Moody’s revised proposal states that, “...our expectation [is] that funds rated in the top category (Aaa-mf) would be sponsored by firms having an investment grade or equivalent credit profile.” Moody’s revised rating methodology also states that, “the quality of a fund’s sponsor will continue to be a factor in our ratings.”
John Walsh, Acting Comptroller of the Currency, wrote in a Feb. 17 letter to Rep. Gregory Meeks, D-N.Y., a member of the House Financial Services Committee, that the Comptroller’s office is “...opposed to any policy that creates an expectation that a national bank will be relied upon to provide support to a sponsored fund.”
Anthony Carfang, a partner at Treasury Strategies, says that “Moody’s recent modification of its proposed ratings methodology does not clearly and fully focus on a fund’s own characteristics separate from a fund’s sponsor.” Treasury Strategies, he said, “continue[s] to believe that Moody’s rating methodology must be consistent with current regulation and never assert pressure on fund sponsors to expressly or tacitly undertake to support their funds as a condition to receiving the highest credit rating.”