The Financial Markets Law Committee (FMLC) has published a paper highlighting uncertainties arising from the European Commission’s proposed Regulation on Money Market Funds (MMF Regulation). The following concerns were included in the FMLC’s paper:
- the liability regime for MMF managers. There are questions over whether a European standard of liability can really be aligned with national legal systems;
- the eligible assets provisions. Legal certainty could be improved if the short selling prohibition contained in the MMF Regulation was amended to require MMFs to comply with the Regulation on short selling. The FMLC also calls for a more flexible approach towards eligible reverse repurchase agreements; and
- the operability of the 3% capital buffer requirement for constant net asset value MMFs. The FMLC is of the view that it is unclear who will be responsible for financing the buffer and that the MMF Regulation should identify the party or parties that are to be responsible for fulfilling the obligation of financing the net asset value buffer. The FMLC also has concerns about the composition and holding of the net asset value buffer and how funds should be transferred from a reserve account.