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Indiana Trust & Investment Management Company
September 19, 2016
 

Back in July of 2014 the U.S. Securities and Exchange Commission (SEC) issued new rules for money market mutual funds. The rules establish new definitions for government funds and retail funds and require certain money market mutual funds, including institutional municipal money market funds, to price and transact at a “floating” or variable Net Asset Value. Under these new rules the institutional municipal money market funds may charge shareholders liquidity fees as well as provide for “redemption gates,” meaning a temporary halt on all withdrawals from the respective fund. The implications for these new rules are such that shareholders could now experience losses if the per-share value of the fund decreases below a lower limit threshold. A caveat to these new rules is that Government and U.S. Treasury money market mutual funds will not be subject to any of the new structural changes and thus will not be subject to fees, gates, or a floating Net Asset Value.

The implementation process for these rules has spanned several years and the final implementation date is set for October 14, 2016. Based upon how Indiana Trust Company utilizes money market funds within the broader structure of portfolio management, earlier this year we made an adjustment to the core money market position in taxable accounts by opting to replace the Northern Trust Municipal Money Market with the Northern Trust Government Select Money Market. Due to the fact that all U.S. Treasury and government money market funds are exempt from these structural reforms, we feel that this change is in the best interest of our clients.

If you have any questions about the aforementioned money market mutual fund reform or any other issues where we can assist then please do not hesitate to contact us. As always, we appreciate your business and the opportunity to help with your financial goals.