gate.\1296\ For example, this information may enable investors to
better understand the events that are affecting and potentially causing
stress to the fund.\1297\ This information may also permit investors to
confirm that the board is, as our rule requires, acting in the best
interests of the fund.\1298\ And given that under our final rules a
board can impose a fee or gate as soon as the fund's weekly liquid
assets fall below the 30% regulatory minimum (and thus different boards
may impose fees or gates at different times), investors' interest in
understanding the board's reasoning is likely to be even more
important.\1299\ For these reasons, we believe this disclosure will
convey material information to those investors who are considering
whether to redeem their shares in response to a fee or gate.
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    \1294\ Our conclusion that the imposition of a fee or gate may
often be a significant event for a money market fund is supported by
the view of many commenters that the imposition of a fee or gate
could have significant implications for a fund that takes this step
and that investors may engage in heavy redemptions after a fee is
imposed or a gate is lifted. See, e.g., supra notes 189 and 190 and
accompanying text.
    \1295\ We note that disclosure of board reasoning is not
uncommon in context where shareholders may be evaluating their
investment decision, such as when a fund engages in a merger or
acquisition. In those circumstances, a fund board usually provides a
recommendation to shareholders and the reasons for their
recommendation. C.f., e.g., Independent Directors Council, Board
Consideration of Fund Mergers, (June 2006), available at http://www.idc.org/pdf/ppr_idc_fund_mergers.pdf (``Directors typically
explain the reasons for their decision to recommend that
shareholders approve a merger in the fund's proxy statement.''). We
note that mergers and acquisitions can also be the subject of
litigation and nevertheless board disclosure of their primary
reasons for their recommendation is commonplace.
    \1296\ See Proposing Release, supra note 25, at section III.G.2.
    \1297\ Cf., e.g., MFDF Comment Letter (acknowledging that
``[d]epending on the situation, fund investors may well have an
interest in better understanding the circumstances that led to the
imposition of redemption fees or gates.'').
    \1298\ See, e.g., ABA Business Law Section Comment Letter (with
respect to the liquidity fees and gates proposal, stating that the
``Commission would assign the money market fund's board of directors
substantial new responsibilities over `life and death' decisions in
the event of a run on the fund.'').
    \1299\ See supra section III.A.1.b.iii.
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    With respect to concerns that the board disclosures set a precedent
implying that the reasoning underlying every other important decision
taken by the board should be similarly disclosed,\1300\ we disagree. As
discussed in section II.A, ready access to liquidity is one of the
hallmarks that has made money market funds popular cash management
vehicles for both retail and institutional investors. Because liquidity
fees and redemption gates could affect this core feature by potentially
limiting the redeemability of money market fund shares under certain
conditions,\1301\ we believe the decision whether to impose those
measures is sufficiently different in kind from most other significant
decisions a board could make that the disclosures required by the rule
would not be a precedent for broadly requiring the disclosure of
boards' rationales in other contexts.
---------------------------------------------------------------------------

    \1300\ See discussion of SIFMA Comment Letter at supra note
1293.
    \1301\ See supra section III.A.1.b.iii. See also supra notes
196-199 and the accompanying text for a discussion of commenters'
concerns of the potentially detrimental effects of a liquidity fee
or gate.
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    In addition, we have amended this disclosure requirement to address
some of the commenters' concerns, while still eliciting useful
information for the Commission and investors. More specifically, we are
revising Form N-CR to require disclosure of a brief discussion of the
``primary considerations or factors taken in account by the board of
directors in its decision'' to impose or not impose a liquidity fee or
gate.\1302\ One commenter suggested we make a similar change, requiring
disclosure of ``a list of material factors considered by the board in
making its determination.'' \1303\ Rather than just a list of material
factors, however, we believe it important that funds provide a more
substantive, but brief, discussion of the primary considerations or
factors taken in account by the board, so that our staff and investors
better understand why the board determined they were important. This
report would not need to include every factor considered by the board,
only the most important or primary ones that shaped the determination
of the board's action. This should help alleviate commenters' concerns
that funds would need to provide lists of all possible factors or
dissect a board's internal deliberations. Instead, we would expect only
a description of the primary considerations or factors leading to the
action taken by the board, and a brief discussion of each.
---------------------------------------------------------------------------

    \1302\ See Form N-CR Part E.6 and Part F.4.
    \1303\ See NYC Bar Committee Comment Letter.
---------------------------------------------------------------------------

    That said, we caution that in preparing these board disclosures,
funds should avoid ``boilerplate'' summaries of all possible factors in
addition to or in lieu of a more substantive narrative.\1304\ Instead,
filers generally should provide information that is tailored to their
fund's particular situation and the context in which their board's
decision was made. In preparing these filings, funds should consider
discussing present circumstances as well as any potential future risks
and contingencies to the extent the board took them into account. We
also note that we provided a non-exhaustive list of possible factors
that a board may have considered in imposing a liquidity fee or gate in
section III.A.2.b above.\1305\
---------------------------------------------------------------------------

    \1304\ Cf., e.g., SIFMA Comment Letter (stating that the
discussion of the board's analysis ``will likely be tailored to
preempt shareholder plaintiffs' counsel who might target boards for
liability in connection with their decisions.'' which ``. . . may
encourage lengthy, but not necessarily useful, disclosure.'').
    \1305\ See supra section III.A.2.b.
---------------------------------------------------------------------------

    Another commenter argued that the board disclosures themselves
might incite widespread redemptions, particularly where the board
considered but chose not to impose a liquidity fee.\1306\ As discussed
in section III.A.1.c above, we acknowledge the possibility that the
prospect of a liquidity fee or gate may cause pre-emptive redemptions,
but we believe that several aspects of our final reforms both make pre-
emptive runs less likely and substantially mitigate their broader
effects if they occur. In addition, we believe disclosure of a board's
reasoning is particularly important in times of stress in order to
mitigate against investor flight to transparency that might otherwise
occur.\1307\
---------------------------------------------------------------------------

    \1306\ See Federated V Comment Letter. But cf., e.g., American
Bankers Ass'n Comment Letter (arguing that the disclosures of Form
N-CR more generally will decrease redemption risk by heightening
self-discipline at funds).
    \1307\ Moreover, with respect to a fund whose weekly liquid
assets have dropped below 10%, we might be concerned that such a
fund may imminently become unable to meet redemptions. Such a
relative lack of liquidity at one fund could also be an indicator of
larger effects that might spread to other funds. Either scenario may
raise concerns that further action by the Commission is warranted.
However, if the particular fund's board waived the liquidity fee,
the related disclosure thereof (e.g., because the drop in liquidity
is temporary and only related to the particular fund) could inform
our determination that no further action by the Commission would be
required.
---------------------------------------------------------------------------

    Finally, we received comments discussing concerns about potentially

duplicative disclosures, in particular the possible redundancy of the
board disclosures on a fund's Web site as well as Form N-CR.\1308\
However, as already discussed with respect to the various concurrent
disclosures of financial support in section III.F.3 above, while we are
sensitive to commenters' concerns about duplication, we believe it
appropriate given the different audiences and uses for such
information.\1309\
---------------------------------------------------------------------------

    \1308\ See Dreyfus Comment Letter. See also, generally, SIFMA
Comment Letter (noting that the ``fund's actions and the triggering
event for the Form N-CR filing may require prospectus disclosure or
notification to the Commission under other rule provisions, so that
in many cases the Form N-CR filing will be duplicative of existing
disclosure and notice requirements.'').
    \1309\ See discussion following supra notes 1248 and 1249 and
accompanying text.
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b. Conforming and Related Changes
    As discussed earlier, the final amendments lower the weekly liquid
asset threshold for triggering the default liquidity fee from 15% to
10% of total assets, and accordingly, we are making corresponding
changes that would require reporting under Form N-CR at the lower
weekly liquid asset threshold.\1310\ In addition, in a change from the
proposal, the final amendments permit money market fund boards to
institute a liquidity fee or impose a gate at any time once weekly
liquid assets fall below 30% if they find that doing so is in the best
interests of the fund.\1311\ We are therefore amending Form N-CR to
reflect these changes.\1312\ We are making certain additional changes
to Form N-CR for clarity and to be consistent with our final amendments
to the liquidity fees and gates requirement.\1313\ Accordingly, under
the revised reporting standard, Parts E and/or F of Form N-CR must be
filed: (i) When a fund, at the end of a business day, has invested less
than 10% of its portfolio in weekly liquid assets and is required to
impose a liquidity fee (unless the board determines otherwise), or (ii)
when a fund voluntarily imposes a liquidity fee or redemption gate any
time it has invested less than 30% of its portfolio in weekly liquid
assets.\1314\
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    \1310\ See supra section III.A.2.a.ii; see also, Form N-CR Part
E, (where applicable, now referencing 10% instead of 15% of weekly
liquid assets).
    \1311\ See supra section III.A.2.
    \1312\ See Form N-CR Parts E and F.
    \1313\ In particular, for clarity, in the introduction to Part E
we now define any affected fund as ``a fund (except a government
money market fund that is relying on the exemption in rule 2a-
7(c)(2)(iii))'' as opposed to ``a Fund (except any Fund that is
subject to the exemption provisions of rule 2a-7(c)(2)(iii) and that
has chosen to rely on the rule 2a-7(c)(2)(iii) exemption
provisions'' as proposed. See proposed (Fees & Gates) Form N-CR Part
E, Introduction. Similarly, for clarity and because of fund's
additional flexibility under our final amendments to the liquidity
fees and gates requirement, in the introduction to Part F we now
simply refer to ``fund'' as opposed to ``a Fund (except any Fund
that is subject to the exemption provisions of rule 2a-7(c)(2)(iii)
and that has chosen to rely on the rule 2a-7(c)(2)(iii) exemption
provisions) that has invested less than fifteen percent of its Total
Assets in weekly liquid assets (as provided in rule 2a-7(c)(2)).''
In addition, we received no comments on Part G of Form N-CR
(requiring reporting when a liquidity fee or redemption gate is
removed) and are adopting it unchanged from the proposal. See Form
N-CR Part G. However, in the Proposing Release, the introduction to
Part G contained a parenthesis specifying that certain exempt funds
are not subject to Part G. See proposed (FNAV) Form N-CR Part G;
proposed (Fees & Gates) Form N-CR Part G. Because we no longer
consider this parenthesis to be necessary, we have deleted it in the
final amendments to enhance the clarity of the instructions of Part
G.
    \1314\ See Form N-CR Part E, clauses (i) and (ii) of the
Introduction (generally triggering disclosure under Part E of Form
N-CR if a non-exempt fund (i) at the end of a business day, has
invested less than 10% of its total assets in weekly liquid assets,
or (ii) has invested less than 30% of its total assets in weekly
liquid assets and imposes a liquidity fee pursuant to rule 2a-7(c).
Correspondingly, we are also adding ``if applicable'' to Item E.1
(requiring disclosure of the initial date on which the fund invested
less than 10% of its total assets in weekly liquid assets, if
applicable), and amending Item E.5 (requiring a brief description of
the facts and circumstances leading to the fund's investing in the
amount of weekly liquid assets reported in Item E.3). See Form N-CR
Items E.1, E.3 and E.5.
---------------------------------------------------------------------------

    In addition, revised Form N-CR includes a new requirement that
funds report their level of weekly liquid assets at the time of the
imposition of fees or gates.\1315\ We believe this new requirement will
allow the Commission and investors to better track and understand
funds' liquidity levels when boards impose a fee or gate using their
discretion, which we expect will enhance the Commission's and
investors' ability to evaluate the extent to which a fund is
experiencing stress as well as the context in which the board made its
decision. Similarly, because we are revising the default liquidity fee
from the proposed 2% to 1%, and thus we expect that there may be
instances where liquidity fees are above or below the default fee
(rather than just lower as permitted under the proposal), we are
requiring that funds disclose the size of the liquidity fee, if one is
imposed.\1316\ In particular, we expect the particular size of the
liquidity fee to be highly relevant to an investor determining whether
to redeem fund shares, as it has a direct impact on the particular
costs that such a shareholder would have to bear for redeeming fund
shares. These changes are closely tailored to our final amendments to
the liquidity fees and gate requirement, which we expect will enhance
the quality and usefulness of Form N-CR to the Commission and
investors.
---------------------------------------------------------------------------

    \1315\ Form N-CR Items E.3 and F.1. In the Proposing Release we
did not explicitly require funds to disclose their size of weekly
liquid assets at the time of the imposition of fees or gates, given
that as proposed funds could only impose a fee or gate once they
crossed the 15% weekly liquid asset threshold. Proposed (Fees &
Gates) Form N-CR Parts E and F. Item F.1 as originally proposed
required disclosure of the initial date on which the fund invested
less than 15% in weekly liquid assets. See proposed (Fees and Gates)
Form N-CR Item F.1. Today we are not requiring an analogous
disclosure of the initial date on which the fund invested less than
10% in weekly liquid assets, because this threshold does not have
any impact on the imposition of a gate and, in any event, would be
disclosed in Item E.1.
    \1316\ See Form N-CR Item E.4.
---------------------------------------------------------------------------

6. Part H: Optional Disclosure
    We are also adopting a new Part H in Form N-CR which allows money
market funds the option to discuss any other events or information that
they may wish to disclose. We intend new Part H to clarify and expand
the scope and range of formats of any additional information that a
fund may wish to provide. In particular, we are adopting Part H to
address commenter concerns that the information provided in the other
parts of Form N-CR may become outdated or lack context.\1317\ We
believe that this new optional disclosure could address some of these
concerns.
---------------------------------------------------------------------------

    \1317\ For example, one commenter cautioned ``in a rapidly
changing environment, the reasons for which the board acted may well
change within a period of four days or significant amounts of
additional information may be available to the fund and its board.
In this context, a filing requirement focused on a prior decision
risks inadvertently misleading fund investors and others about the
state of the fund's operations.'' See MFDF Comment Letter.
---------------------------------------------------------------------------

    This optional disclosure is intended to provide money market funds
with additional flexibility to discuss any other information not
required by Form N-CR, or to supplement and clarify other required
disclosures.\1318\ This optional disclosure does not impose on money
market funds any affirmative obligation. Rather, this is solely
intended as a discretionary forum where funds, if they so choose, can
disclose any other information they deem helpful or relevant. In
addition, although we expect that funds would typically file Part H
along with a filing under another part of Form N-CR, we are not
imposing any particular deadline for these filings, and thus a fund may
file an optional disclosure on Part H of Form N-CR at any time.
---------------------------------------------------------------------------

    \1318\ See Form N-CR Item H.1, Instructions.
---------------------------------------------------------------------------

7. Timing of Form N-CR
    We are requiring initial filings of Form N-CR to be submitted
within one business day of the triggering event, and in some cases,
requiring a follow-up

amendment with additional detail to be submitted four days after the
event with some modifications from the proposal. A number of commenters
requested additional time for Form N-CR filings, expressing concern
over the timing requirements for specific items of Form N-CR,\1319\ as
well as objecting to the timing requirements more generally.\1320\ For
example, one commenter recommended that the filing deadline for the
initial filing be extended from one to three business days and the
follow-up filing from four to seven business days.\1321\ Commenters
argued that providing additional time would permit funds to ensure that
filings are prepared accurately and thoughtfully \1322\ while also
better enabling fund personnel to prioritize other exigent matters
during times of crisis.\1323\ They also argued that it may not be
feasible or may be extremely costly for a fund in times of crisis to
formulate within one business day the actions it may take in response
to an event of default and prepare a corresponding description, as
required under the proposal.\1324\ We are not changing the filing
deadlines of Form N-CR. The Commission and shareholders have a
significant interest in knowing about the events reported on Form N-CR
as soon as possible, to be able to effectively monitor events and to
respond as necessary. We believe the longer reporting periods or
entirely alternative reporting format (such as periodic reports, which
might not be filed until significantly later) as proposed by commenters
would frustrate the intent of Form N-CR in alerting the Commission,
investors and other market observers about such important events in a
timely and meaningful manner.
---------------------------------------------------------------------------

    \1319\ See, e.g., Fidelity Comment Letter, Schwab Comment
Letter.
    \1320\ Commenters proposed a range of alternative deadlines.
See, e.g., SSGA Comment Letter (generally extend time frame),
Dechert Comment Letter (extend one-day filing deadline from 5:30pm
to 10pm on the next business day), Schwab Comment Letter (four
business days for filings related to a default or insolvency under
Part B of Form N-CR), Dreyfus Comment Letter (2-3 day time frame),
Stradley Ronon Comment Letter (seven business days for certain
items), SIFMA Comment Letter (three and seven business days
respectively for the initial and follow-up filings), IDC Comment
Letter (two weeks for the second filing). Others proposed moving
parts of Form N-CR to other annual or periodic reports altogether.
See, e.g., MFDF Comment Letter (move the discussion of the
circumstances that led to a fee or gate to a new annual management
discussion of fund performance.), NYC Bar Committee Comment Letter
(proposing to revise and move the discussion of the board's analysis
to the report to shareholders covering the relevant period).
    \1321\ SIFMA Comment Letter.
    \1322\ See, e.g., SIFMA Comment Letter; IDC Comment Letter, SSGA
Comment Letter, Stradley Ronon Comment Letter, MFDF Comment Letter.
    \1323\ See SIFMA Comment Letter. See also, e.g., Dreyfus Comment
Letter.
    \1324\ See, e.g., Schwab Comment Letter (noting that ``[s]ome of
the requested information can be provided in one business day, such
as the securities affected, the date or dates on which the default
or event of insolvency occurred, the value of the affected
securities, and the percentage of the fund's total assets
represented by the affected security. But we believe it is
unreasonable to require a fund's board to determine in a single day
what actions it should take in response to the event.''). Commenters
also noted that it may be extremely costly to provide some of the
reported information in a single business day. See, e.g., Fidelity
Comment Letter (stating that ``[i]t would be difficult for MMFs to
produce validated data ready for public dissemination within one
business day . . . . Further, providing data within a short
timeframe would come at an estimated cost of $300,000-$500,000 [. .
.].'').
---------------------------------------------------------------------------

    We appreciate commenters' concerns, however, and to help ease the
filing burden we are revising Form N-CR to move certain disclosures in
Items B, C and D that may take longer to prepare from the initial
filing due within a single day to the follow-up filing due in four
business days.\1325\ In particular, the items moved to the follow-up
filing are the description of actions the fund plans to take, or has
taken, in response to a default (Item B.5), the explanation for the
reasons and terms of any financial support provided (Item C.8), the
term of any financial support provided (Item C.9), the brief
description of any contractual restrictions relating to any financial
support (Item C.10), and the principal reason or reasons for a decline
in a fund's shadow price (Item D.3).\1326\ We appreciate commenters'
concerns that disclosures such as these may take additional time to
prepare.\1327\ We believe these specific disclosure items may be more
labor intensive and take longer to prepare because they generally
solicit qualitative and analytical information, whereas the other items
in Parts B through D generally focus more on initially alerting the
Commission and shareholders about a particular event and other key
quantitative data.\1328\
---------------------------------------------------------------------------

    \1325\ In particular, filers are required to respond to Items
B.5, C.8, C.9, C.10, and D.3 in an amendment to the initial report
within four business days. All other Items in Parts B, C, and D must
be disclosed in the initial report within one business day. We have
made corresponding changes to the instructions to the form. See Form
N-CR Part B, C, D, Instructions. In addition, we have rearranged
what used to be proposed Item C.4 in the Proposing Release to be new
Item C.8 in order to better streamline the disclosures required to
be filed within one business day (Items C.1 through C.7) versus four
business days (Items C.8 through C.10). See Proposing Release,
proposed (Fees & Gates) Form N-CR Item C.4, Form N-CR Item C.8.
    \1326\ See Fidelity Comment Letter (suggesting ``that the SEC
simplify the filing requirements for the first business day
following the event to focus on shareholder notification of the
event and key quantitative data,'' while ``providing the remaining
qualitative information (proposed Form N-CR Item B.5, C.4, C.9,
C.10, D.3, E.3, E.4, F.3, F.4) on the second filing.''
    \1327\ See supra note 1324.
    \1328\ Cf. Fidelity Comment Letter.
---------------------------------------------------------------------------

    Reducing the number of items included in the initial filing and
moving the more time consuming and complicated disclosures to a second
filing is designed to help address commenters' concerns about the one-
day deadline of the initial filing,\1329\ while still ensuring that the
Commission, shareholders and other market observers are provided with
these critical alerts as quickly as possible. We expect the information
filed on the initial report will be sufficient to alert the Commission,
investors and other interested parties about certain significant
events. While important, we also believe that the Items we are moving
to the follow-up filing of Form N-CR may be of less immediate concern
to the Commission and shareholders.
---------------------------------------------------------------------------

    \1329\ See, e.g., SIFMA Comment Letter, SSGA Comment Letter,
Dreyfus Comment Letter.
---------------------------------------------------------------------------

    We are not, however, generally changing the one-day deadline of the
initial filing,\1330\ nor are we extending the four-day deadline for
the follow-up filing of Form N-CR.\1331\ We are concerned that
extending the initial filing deadline beyond one business day could
substantially diminish the informational utility of Form N-CR. The
Commission and shareholders have a significant interest in knowing
about the events reported on Form N-CR as soon as possible, to
effectively monitor events and respond as necessary. We need this
information to be reported promptly to effectively monitor money market
funds that have come under stress and respond as necessary. A longer
reporting period would frustrate the intent of Form N-CR in alerting
the Commission, investors and other market observers about such
important events in a timely and meaningful manner.\1332\
---------------------------------------------------------------------------

    \1330\ We have, however, revised the instructions on timing of
the one-day deadline of the initial filing in each of Parts B
through F to conform them to the wording used in the instruction on
timing generally in General Instruction A. See Form N-CR Part B, C,
D, E, F, Instructions.
    \1331\ We proposed to allow the discussion of the boards'
analysis related to imposing fees or gates be included in the
follow-up filing, and we are adopting that requirement as proposed,
as modified by the amendments to the board reporting discussed
above. See supra section III.F.5 (Board Disclosures); Form N-CR Item
E.5, E.6, F.3, F.4.
    \1332\ For example, if funds were permitted three business days
to prepare an initial filing, a fund that experienced a portfolio
security default on a Friday would not be required to make an
initial filing under Part B of Form N-CR until just before the close
of business the following Wednesday. Depending on the circumstances,
such a delay could prevent investors from taking into account this
disclosure when making an investment decision until the next morning
on Thursday (such as with respect to potential investors evaluating
whether to purchase fund shares). Similarly, such a long delay would
hinder our ability to effectively monitor money market funds that
have come under stress and respond as necessary (in particular in
light of our elimination of rule 2a-7(c)(7)(iii)(A), which currently
requires money market funds to report defaults or events of
insolvency to the Commission by email. See supra note 1211).

---------------------------------------------------------------------------

    We also remain unpersuaded that the benefits of extending the
follow-up filing beyond four business days is justified in light of the
corresponding reduction in the utility of the information reported on
Form N-CR to the Commission, shareholders and other market observers.
Extending the follow-up filing deadline could lead to a prolonged lack
of material information about the triggering event. Such a delay could
hinder investors' ability to evaluate their investments and undermine
investor confidence.\1333\ Furthermore, it could frustrate the
Commission's ability to effectively monitor and take any appropriate
response with respect to money market funds that have come under
stress.\1334\
---------------------------------------------------------------------------

    \1333\ For example, a prolonged lack of material information may
undermine investors' expectations that they are making investment
decisions in a transparent market, which may lead to increased
market volatility in affected money market funds as a result of the
relative lack of accurate and timely information.
    \1334\ For example, the Commission has a strong interest in
knowing why a fund imposed a fee or gate. Depending on whether the
reasons for such a gate were unique to the particular fund or
related to broader market events, further action on the part of the
Commission may be required to protect other investors and markets.
Accordingly, given that the Commission generally needs this
information as quickly as possible, we do not think the marginal
benefits to funds of extending the deadline beyond what we believe
to be reasonably required to prepare a follow-up filing is
justified.
---------------------------------------------------------------------------

    Because we expect that the information required to be provided in
follow-up reports on Form N-CR should be readily accessible, we
continue to believe four business days should be a sufficient amount of
time for funds to prepare the report, even in light of the likely
competing priorities on fund personnel during times of stress. We also
recognize that some of the preparatory burdens faced by fund personnel
could (and likely will) \1335\ be shifted to legal counsel to the
extent a fund chooses to engage legal counsel to assist in the drafting
of a Form N-CR filing. Accordingly, we are adopting a deadline of one
business day for an initial report and four business days for a follow-
up report under Form N-CR.\1336\
---------------------------------------------------------------------------

    \1335\ See infra discussion containing note 1376.
    \1336\ See Form N-CR General Instruction, A; Form N-CR Part B,
C, D, E, F, Instructions which specify that responses to Items B.5,
C.8, C.9, C.10, D.3, E.5, E.6, F.3 and F.4 may be filed within four
business days.
---------------------------------------------------------------------------

8. Economic Analysis
    As discussed above and in our proposal,\1337\ we believe that the
Form N-CR reporting requirements will provide important transparency to
investors and the Commission, and also should help investors better
understand the risks associated with a particular money market fund, or
the money market fund industry generally. The Form N-CR reporting
requirements will permit investors and the Commission to receive
information about certain money market fund material events
consistently and relatively quickly. As discussed above, we believe
that investors and the Commission have a significant interest in
receiving this information in this format and with this timing because
it will permit investors and the Commission to monitor indicators of
stress in specific funds or fund groups, as well as the money market
fund industry, and also to analyze the economic effects of certain
material events. The Form N-CR reporting requirements will give
investors and the Commission a greater understanding of the
circumstances leading to stress events, and how a fund manages them. We
believe that investors may find this information to be meaningful in
determining whether to purchase fund shares or remain invested in a
fund.
---------------------------------------------------------------------------

    \1337\ See Proposing Release, supra note 25, at section III.G.3.
---------------------------------------------------------------------------

    However, we recognize that the Form N-CR reporting requirements
have operational costs (discussed below), and also may result in
opportunity costs, in that personnel of a fund that has experienced an
event that requires Form N-CR reporting may lose a certain amount of
time that could be used to respond to that event because of the need to
comply with the reporting requirement.\1338\ For example, as discussed
with respect to timing in section III.F.7 above, commenters argued that
providing additional time would permit funds to ensure that filings are
prepared accurately and thoughtfully \1339\ while also better enabling
fund personnel to prioritize other exigent matters during times of
crisis.\1340\ They also argued that it may not be feasible or may be
extremely costly for a fund in times of crisis to formulate within one
business day the actions it may take in response to an event of default
and prepare a corresponding description, as required under the
proposal.\1341\ As discussed in section III.F.7 above, to help ease the
filing burden we have revised Form N-CR to move certain disclosures
that may take longer to prepare from the initial filing due within one
day to the follow-up filing due in four business days. We therefore
believe that the final deadlines adopted today for Form N-CR balance
the exigency of the report with the time and cost it will reasonably
take a fund to compile the required information.
---------------------------------------------------------------------------

    \1338\ Various commenters expressed concern that preparing Form
N-CR would likely compete with other priorities that fund personnel
would be handling during a crisis. See, e.g., SIFMA Comment Letter,
Dreyfus Comment Letter.
    \1339\ See, e.g., SIFMA Comment Letter; IDC Comment Letter, SSGA
Comment Letter, Stradley Ronon Comment Letter, MFDF Comment Letter.
    \1340\ See SIFMA Comment Letter. See also, e.g., Dreyfus Comment
Letter.
    \1341\ See, e.g., Schwab Comment Letter (noting that ``[s]ome of
the requested information can be provided in one business day, such
as the securities affected, the date or dates on which the default
or event of insolvency occurred, the value of the affected
securities, and the percentage of the fund's total assets
represented by the affected security. But we believe it is
unreasonable to require a fund's board to determine in a single day
what actions it should take in response to the event.''). Commenters
also noted that it may be extremely costly to provide some of the
reported information in a single business day. See, e.g., Fidelity
Comment Letter (stating that ``[i]t would be difficult for MMFs to
produce validated data ready for public dissemination within one
business day . . . . Further, providing data within a short
timeframe would come at an estimated cost of $300,000-$500,000 [. .
.].'').
---------------------------------------------------------------------------

    We believe that the proposed Form N-CR reporting requirements may
complement the benefits of increased transparency of publicly available
money market fund information that have resulted from the requirement
that money market funds report their portfolio holdings and other key
information on Form N-MFP each month. The DERA Study noted that the
additional disclosures that money market funds are required to make on
Form N-MFP improve fund transparency (although funds file the form on a
monthly basis with no interim updates, and the Commission currently
makes the information public with a 60-day lag).\1342\ The DERA Study
also noted that this ``increased transparency, even if reported on a
delayed basis, might affect a fund manager's willingness to hold
securities whose ratings are at odds with the underlying risk,
especially at times when credit conditions are deteriorating.'' \1343\
Additionally, the availability of public, standardized, money market
fund-related data that has resulted from the Form N-MFP filing
requirement has assisted both the Commission and the money market fund
industry in various

studies and analyses of money market fund operations and risks.\1344\
---------------------------------------------------------------------------

    \1342\ See DERA Study, supra note 24, at 31; see also, infra
note 1441 and accompanying text (discussing the elimination of the
60-day delay in making Form N-MFP information publicly available).
    \1343\ See DERA Study, supra note 24, at 38.
    \1344\ See Money Market Mutual Funds, Risk, and Financial
Stability in the Wake of the 2010 Reforms, 19 ICI Research
Perspective No. 1 (Jan. 2013), at note 29 (noting that certain
portfolio-related data points are often only available from the
SEC's Form N-MFP report).
---------------------------------------------------------------------------

    The Form N-CR reporting requirement should enhance our
understanding of the money market fund industry that the Commission has
gained from analyzing Form N-MFP data by providing complementary data
and additional transparency about money market funds' risks on a near
real-time basis that is not currently available on Form N-MFP. This
requirement may, like Form N-MFP disclosure, help impose market
discipline on portfolio managers \1345\ and provide additional data
that would allow investors to make investment decisions, and allow the
Commission and the money market fund industry to conduct risk- and
operations-related analyses.
---------------------------------------------------------------------------

    \1345\ See American Bankers Ass'n Comment Letter (for example,
stating that ``[k]nowing that any form of sponsor support would be
required to be disclosed within 24 hours, fund managers would likely
do everything they could to avoid needing sponsor support.'').
---------------------------------------------------------------------------

    We believe that the reporting requirements we are adopting today
may positively affect regulatory efficiency because all money market
funds would be required to file information about certain material
events on a standardized form. This will improve the consistency of
information disclosure and reporting, and assist the Commission in
overseeing individual funds, and the money market fund industry
generally, more effectively. The requirements also could positively
affect informational efficiency. This should assist investors in
understanding various risks associated with certain funds, and risks
associated with the money market fund industry generally, which in turn
should assist investors in choosing whether to purchase or redeem
shares of certain funds. Currently, funds compete on information
provided on a fund's Web site and Form N-MFP, as well as on more
traditional competitive factors such as price and yield. Implicitly,
investors have also relied on sponsors to step in and support a fund
when there is an adverse event. However, as we observed with the
Reserve Primary Fund, this does not always happen. As such, the
requirements should positively affect competition because funds may
compete with each other based on information required to be disclosed
on Form N-CR. For instance, investors might view a fund that invests in
securities whose issuers have never experienced a default as a more
attractive investment than another fund that frequently files reports
in response to Form N-CR Part B (``Default or Event of Insolvency of
portfolio security issuer''). However, it is also possible that
investors may move their assets to larger fund complexes if, based on
Form N-CR disclosures, they determine that such fund complexes are more
likely than smaller entities to provide financial support to their
funds. Also, if investors move their assets among money market funds or
decide to invest in investment products other than money market funds
as a result of the Form N-CR reporting requirements, this could
negatively affect the competitive stance of certain money market funds,
or the money market fund industry generally.
    The filing of Form N-CR could have additional effects on capital
formation. The information filed on Form N-CR could improve capital
formation if investors better understand that a fund is not
sufficiently addressing the cause that led to the Form N-CR filing. One
commenter \1346\ suggested that certain Form N-CR disclosures would
make money market funds more susceptible to heavy redemptions during
times of stress. While we acknowledge the possibility of pre-emptive
redemptions, as discussed in detail above, several aspects of today's
amendments are designed to mitigate this risk. In addition, the other
reforms we are adopting today (such as liquidity fees and redemption
gates) will provide some fund managers additional tools for managing
such redemptions, if they were to occur.\1347\ Moreover, the additional
information should assist investors in making a more informed
investment decision, which leads to improved efficiency and capital
formation. Furthermore, commenters have also argued that the proposed
Form N-CR disclosures will actually decrease redemption risk by
heightening self-discipline at funds, which would also increase capital
formation.\1348\ In addition, it is possible that investors will react
positively to the information on Form N-CR if they feel the fund is
sufficiently addressing the cause of the Form N-CR filing. For example,
as noted in section III.F.5, we believe disclosure of a board's
reasoning is particularly important in times of stress in order to
mitigate against investor flight to transparency that might otherwise
occur.
---------------------------------------------------------------------------

    \1346\ See, e.g., Federated V Comment Letter (``The goal of
reform should be not to have the filing of a Form N-CR cause the
widespread redemptions the Reform Proposal seeks to avoid.'');
Federated VIII Comment Letter.
    \1347\ In addition, as discussed in more detail in sections
III.F.4 and III.F.5 above, we note that some of our responses in
section III.A.1.c.i to concerns over pre-emptive run risk related to
the liquidity fees and gates requirement would similarly apply to
run risk concerns with respect to certain specific disclosures in
Form N-CR.
    \1348\ See, e.g., American Bankers Ass'n Comment Letter.
---------------------------------------------------------------------------

    If money market fund investors decide to move all or a substantial
portion of their money out of the market, this could negatively affect
capital formation.\1349\ On the other hand, capital formation could be
positively affected if the Form N-CR reporting requirements were to
assist the Commission in overseeing and regulating the money market
fund industry, and the resulting regulatory framework would allow
investors to more efficiently or more effectively invest in money
market funds. Additional effects of these filing requirements on
efficiency, competition, and capital formation would vary according to
the event precipitating the Form N-CR filing, and they are
substantially similar to the effects of other disclosure requirements,
as discussed in more detail above.\1350\
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    \1349\ For an analysis of the potential macroeconomic effects of
our main reforms, see supra section III.K.
    \1350\ We believe that the effects on efficiency, competition,
and capital formation of filing Form N-CR in response to Part B or C
overlap significantly with the effects of the disclosure
requirements regarding the financial support provided to money
market funds. See discussion in supra section III.F. We believe that
the effects of filing Form N-CR in response to Part D overlap
significantly with the effects of the disclosure requirements
regarding a money market fund's daily market-based NAV per share.
See discussion in supra section III.F.4. We believe that the effects
of filing Form N-CR in response to Parts E, F, and G overlap
significantly with the effects of the disclosure requirements
regarding current and historical instances of the imposition of
liquidity fees and/or gates. See supra section III.F.5.
---------------------------------------------------------------------------

    The Commission is unable to measure the quantitative benefits of
these requirements because of uncertainty about how increased
transparency may affect different investors' behavior, their
understanding of the risks associated with money market funds, and the
potential effects of the disclosure on market discipline.
a. Alternatives Considered
    As a possible alternative, we could have chosen to not adopt Form
N-CR or any of its disclosures (as well as any of the corresponding SAI
or Web site disclosures). A variation of this alternative would have
been to eliminate Form N-CR but adopt the corresponding SAI and/or Web
site disclosures. As discussed above, commenters expressed concern
about

the potential redundancy of Form N-CR or parts thereof in light of the
corresponding Web site and SAI disclosures.\1351\ If we did not adopt
Form N-CR and/or any of the corresponding SAI and Web site disclosures,
affected funds would not incur the additional costs related to Form N-
CR that we discuss in more detail below.\1352\ In addition, with
respect to the board disclosure requirements in Parts E and F for Form
N-CR, fund boards would not be concerned about the loss of board
confidentiality or the possibility of opportunistic shareholder
litigation.\1353\ However, we rejected this set of alternatives for a
number of reasons, including the following. First, each of the
disclosures in Form N-CR serves to alert Commission staff, investors,
and other market observers (such as news services, which in turn may
alert investors) about important events in a timely manner.\1354\
Second, as discussed in more detail in section III.F.3 (Concerns over
Potential Redundancy), although we acknowledge there will be some
textual overlap between these different forms, we believe each serves a
distinct purpose.\1355\ Moreover, as discussed in section III.F.5
(Board Disclosure) above, we have revised the board disclosure
requirements in a number of ways in order to minimize any concerns over
board confidentiality or opportunistic litigation.
---------------------------------------------------------------------------

    \1351\ See supra note 1249 and accompanying discussion.
    \1352\ Similarly, if we also had not adopted the corresponding
SAI or Web site disclosures, funds would further not incur their
related costs previously described. See supra sections III.E.8 and
III.E.9.h.
    \1353\ See our discussion about commenters' concerns in supra
note 1290 and accompanying discussion.
    \1354\ See also supra section III.F.8 for our discussion of the
other economic benefits of Form N-CR.
    \1355\ See supra section III.F.3. (Concerns over Potential
Redundancy).
---------------------------------------------------------------------------

    Another alternative suggested by a number of commenters is to
extend the deadline for filing Form N-CR by up to two weeks. \1356\ A
variation of this alternative would have been to move all or certain
parts of Form N-CR to other (and typically later) periodic reports. For
example, one commenter recommended that the board disclosure
requirements under Parts E and F of Form N-CR ``be provided in the
report to shareholders covering the relevant period.'' \1357\ Extending
the deadline or moving these disclosures to a later periodic report or
other filing could lower the cost for funds since funds may have
additional cost due to the short time period to prepare the initial
filings within one day and the follow-up within four days. Such
additional preparation time may also lower opportunity costs for the
fund, in that personnel of a fund can spend the initial time responding
to the event that requires Form N-CR reporting rather than filing the
Form N-CR. However, we rejected this set of alternatives because, as
discussed above, in times of market stress the purpose of Form N-CR is
to alert the Commission, shareholders and other market observers about
significant events that affect the fund.\1358\ If investors feel that
they will have the necessary information to make an informed decision
in times of stress, then this may lead to additional capital for funds.
Likewise, we also believe that having the initial filing within one
business day and the follow-up within four business days may lead to
more market discipline among funds, resulting in increased investor
willingness to participate in this market, which could also lead to
additional capital for funds.
---------------------------------------------------------------------------

    \1356\ See supra note 1320 and accompanying text for a
discussion of commenters who proposed extending the filings
deadlines.
    \1357\ NYC Bar Committee Comment Letter. See, also, e.g., MFDF
Comment Letter (move the discussion of the circumstances that led to
a fee or gate to a new annual management discussion of fund
performance.).
    \1358\ For example, see also our related discussion in supra
notes 1329-1333 and the accompanying text.
---------------------------------------------------------------------------

    We also considered making the definition of financial support
subject to a specific threshold or general materiality qualification,
such as a specific drop in the NAV or liquidity.\1359\ For example,
such a threshold might apply if a fund's NAV drops by more than \1/4\
of 1 percent and the sponsor's investment in the fund causes the fund's
NAV to recover. We rejected this alternative for several reasons.
First, some types of sponsor support like a sponsor support agreement
or a performance guarantee, which is included in the definition, does
not necessarily or immediately result in a change in NAV or liquidity.
Second, it is possible that sponsors would provide financial support to
their funds before reaching the particular threshold, thereby avoiding
the reporting requirement. As one commenter stated, ``[k]nowing that
any form of sponsor support would be required to be disclosed within 24
hours, fund managers would likely do everything they could to avoid the
need for sponsor support.''\1360\
---------------------------------------------------------------------------

    \1359\ See, e.g., T. Rowe Price Comment Letter.
    \1360\ See American Bankers Ass'n Comment Letter.
---------------------------------------------------------------------------

    We also considered various other refinements that specifically
related to one of the particular disclosure items in Form N-CR, such as
commenters' proposal to increase the deviation in the NAV triggering a
report on Part D of Form N-CR from 0.25% to 0.5%.\1361\ We generally
consider and address these other suggestions in our discussion of the
final amendments above.
---------------------------------------------------------------------------

    \1361\ See supra note 1276.
---------------------------------------------------------------------------

b. Operational Costs: Overview
    The operational costs of filing Form N-CR in response to the events
specified in Parts B though H of Form N-CR are discussed below.\1362\
Our estimates of operational costs below generally reflect the costs
associated with an actual filing of Form N-CR. We continue to expect
that the operational costs to money market funds to report the new
information will generally be the same costs we discuss in the
Paperwork Reduction Act analysis in section IV.D.2.a below.\1363\
---------------------------------------------------------------------------

    \1362\ These costs incorporate the costs of responding to Part A
(``General information'') of Form N-CR. We anticipate that the costs
associated with responding to Part A will be minimal, because Part A
requires a fund to submit only basic identifying information.
    \1363\ As discussed in more detail in infra section IV.D.2.a, we
have revised our cost estimates associated with filing a report with
respect to each Part of Form N-CR. The Proposing Release originally
estimated that a fund would spend on average approximately 5 burden
hours and total time costs of $1,708 to prepare, review, and submit
a report under any Part of Form N-CR. See Proposing Release, supra
note 24, at nn.1203 and 1204 and accompanying text. This resulted in
a total annual burden of approximately 301 burden hours and total
annual time costs of approximately $102,765 under the floating NAV
alternative and approximately 341 burden hours and total annual time
costs of approximately $116,429 under the liquidity fees and gates
alternative. See Proposing Release, supra note 25, at nn.1113 and
1205 and accompanying text.
---------------------------------------------------------------------------

    We recognize that there could also be some advance discussions and
preparation within the industry and at money market funds about having
the necessary monitoring systems and controls in place to detect
relevant issues immediately, escalate them quickly and get the form
approved and filed. While we acknowledge these potential additional
costs, we are unable to estimate them with any specificity,\1364\
largely because we do not have the necessary information on how
prepared funds may already be or how much advance preparation is needed
in regards to filing a report in Form N-CR. For example, because
certain disclosures such as Part B and C of Form N-CR will in part
replace existing email notification

requirements,\1365\ we expect that many funds may already be prepared
to detect and respond to these particular items. Moreover, in
particular with respect to the disclosures about any liquidity fee or
gate on Parts E through G of Form N-CR, we question the extent to which
any advance preparation would be useful in light of the highly fact-
specific nature of these disclosures.\1366\ Accordingly, some funds may
engage in very little or no advance preparation. In addition, we
believe that most (if not all) preparational costs related to an event
reportable on Parts E through G of Form N-CR, such as planning
appropriate processes for the consideration of a liquidity fee or gate
by the board, are more directly attributable to the liquidity fees and
gates requirement itself,\1367\ rather than the corresponding
disclosure requirement on Form N-CR.\1368\
---------------------------------------------------------------------------

    \1364\ No commenters provided concrete cost estimates
specifically in regards to these potential preparatory costs. For a
more general discussion of commenters' comments on the burdens of
Form N-CR, see, e.g., supra note 1363 and III.F.8.
    \1365\ See supra notes 1211 and 1213.
    \1366\ For similar reasons, our cost estimates in the PRA
analysis in infra section IV.D.2 generally presume no particular
advance preparation when preparing a filing on Form N-CR.
    \1367\ See, e.g., SIFMA Comment Letter (estimating costs of
implementing the ability to impose liquidity fees and gates).
    \1368\ See supra section III.A.1.
---------------------------------------------------------------------------

    As discussed in sections III.F.2-III.F.6 above, we are making a
number of changes in our final amendments, a number of which we expect
to impact the costs associated with filing a report on Form N-CR.\1369\
For example, with respect to Parts B, C and D, we are now permitting
filers to split their response into an initial and follow-up
filing,\1370\ similar to what we had already proposed for Parts E and F
in the Proposing Release. Accordingly, in addition to our new estimate
for Part H, we are updating and providing a more nuanced estimate of
the costs associated with filing a report with respect to each of Parts
B through G of Form N-CR.
---------------------------------------------------------------------------

    \1369\ See supra sections III.F.2-III.F.6 for a more detailed
discussion of each of our final amendments.
    \1370\ See supra section III.F.7.
---------------------------------------------------------------------------

    In updating our estimates, we also considered comments about the
operational costs related to Form N-CR. One commenter estimated that
requiring disclosure of certain Items in Form N-CR within one business
day could cost $300,000 to $500,000.\1371\ However, our final
amendments incorporate this commenter's proposed solution by shifting
Items B.5, C.4, C.9, C.10, and D.3 from the initial filing to the
follow-up filing.\1372\ Because today's amendments permit funds to file
a response to these Items within four business days instead of just one
business day, we expect the costs of filing Form N-CR to be notably
less than what this commenter originally estimated.\1373\ Although we
received no other specific cost estimates from commenters with respect
to Form N-CR, we also took into account commenters' general concerns
and suggestions about the timing and various costs and burdens of Form
N-CR.\1374\ For example, we noted that commenters particularly cited
the burdens and the role of the board in drafting and reviewing the
board disclosures in Parts E and F.\1375\
---------------------------------------------------------------------------

    \1371\ See Fidelity Comment Letter (stating that ``[i]t would be
difficult for MMFs to produce validated data ready for public
dissemination within one business day, particularly for items such
as B.5, C.4, C.9, and C.10. Providing quantitative data within one
business day would not only call for the coordination of information
and its sources, but also its review and verification to ensure
accuracy and completeness. Accordingly, we do not believe that this
strict filing deadline is operationally feasible. Further, providing
data within a short timeframe would come at an estimated cost of
$300,000-$500,000, without factoring in the costs of ongoing
compliance and filing, all of which greatly exceeds the SEC's
estimated cost of $1,700 and five hours to prepare and review
information.'').
    \1372\ See supra note 1326 and accompanying text.
    \1373\ We are generally unable, however, to fully evaluate the
basis or validity of this commenter's cost estimate, as we do not
have all the data or assumptions on which this commenter's estimate
is based. See supra note 1324 and accompanying text; Fidelity
Comment Letter.
    \1374\ See, e.g., Dreyfus Comment Letter, Federated VIII Comment
Letter, Legg Mason & Western Asset Comment Letter, MFDF Comment
Letter.
    \1375\ See, e.g., IDC Comment Letter (``Any public disclosure
about a board's decision-making process would require careful and
thoughtful drafting and multiple layers of review (by board counsel,
fund counsel, and the directors, among others).''); Stradley Ronon
Comment Letter; SIFMA Comment Letter.
---------------------------------------------------------------------------

    We also updated our estimates to reflect the likelihood that some
funds may engage legal counsel to assist with the drafting and review
of Form N-CR, by which they would incur additional external costs. For
example, as noted above, commenters cited the particular burdens and
the role of various parties in drafting and reviewing the board
disclosures in Parts E and F.\1376\ In addition, given commenters'
concern about timing as noted in section III.F.7, we take these various
concerns to be an indicator that some funds may engage legal counsel.
Accordingly, we estimate, in particular with respect to the follow-up
reports under Parts B through F as well as any reports on Part H, that
certain funds will engage legal counsel to assist with the drafting and
review of Form N-CR, thereby incurring additional external costs.\1377\
---------------------------------------------------------------------------

    \1376\ See id.
    \1377\ See infra note 2386 and accompanying discussion.
---------------------------------------------------------------------------

c. Operational Costs of Part B: Default Events
    As noted in the Proposing Release,\1378\ we have estimated that the
costs of filing a report in response to an event specified on Part B of
Form N-CR will be higher than the costs that money market funds
currently incur in complying with the rule 2a-7 provision which
currently requires money market funds to report defaults or events of
insolvency to the Director of Investment Management or the Director's
designee by email.\1379\
---------------------------------------------------------------------------

    \1378\ See Proposing Release, supra note 25, at n.730 and
accompanying text.
    \1379\ The requirements of current rule 2a-7(c)(7)(iii)(A) and
the requirement of Part B of Form N-CR are substantially similar,
although Part B on its face specifies more information to be
reported than current rule 2a-7(c)(7)(iii)(A). However, we
understand that funds disclosing events of default or insolvency
pursuant to current rule 2a-7(c)(7)(iii)(A) already have
historically reported substantially the same information required by
Part B. As noted, we are eliminating the existing email notification
requirements in rule 2a-7 and are replacing it with the notification
requirements of Form N-CR. See supra note 1211. We discuss the
impact on costs of this elimination in sections III.F.8 and III.N.3.
---------------------------------------------------------------------------

    In updating our estimates for Part B of Form N-CR, we estimate the
costs of filing and amending the report in response to an event
specified on Part B of Form N-CR to include time costs of $4,830 and
external costs of $1,000, for total costs of $5,830 for each set of
initial and follow-up reports,\1380\ and we expect, based on our
estimate of the average number of notifications of events of default or
insolvency that money market funds currently file each year, that the
Commission would receive approximately 20 such filings per year.\1381\
Therefore, we expect that the annual costs relating to filing a report
on Form N-CR in response to an event specified on Part B would be
$116,600.\1382\
---------------------------------------------------------------------------

    \1380\ The costs associated with filing Form N-CR in response to
an event specified on Part B of Form N-CR are paperwork-related
costs and are discussed in more detail in infra section IV.D.2.b.
    \1381\ The Commission estimates this figure based in part by
reference to our current estimate of an average of 20 notifications
to the Commission of an event of default or insolvency that we
previously estimated money market funds to file pursuant to current
rule 2a-7(c)(7)(iii) each year. See Submission for OMB Review,
Comment Request, Extension: Rule 2a-7, OMB Control No. 3235-0268,
Securities and Exchange Commission 77 FR 236 (Dec. 7, 2012). We
believe that this estimate is likely to be high, in particular when
markets are not in crisis as they were during 2008 or 2011. However,
we are continuing to use this higher estimate to be conservative in
our analysis.
    \1382\ These estimates are based on the following calculations:
$5,830 (cost per complete filing) x 20 filings per year = $116,600
per year. See supra notes 1380 and 1381 and accompanying text.

---------------------------------------------------------------------------

d. Operational Costs of Part C: Financial Support
    In addition to the general discussion above, in updating our
estimate for Part C we also considered certain changes from the
proposal specifically related to Part C of Form N-CR,\1383\ most
notably our changes to the definition of financial support,\1384\ which
we estimate will impact the frequency of filings on Part C of Form N-
CR. As we noted in the Proposing Release,\1385\ we have estimated the
costs of filing a report in response to an event specified on Part C of
Form N-CR in part by reference to the costs that money market funds
currently incur in complying with the rule 2a-7 provision that requires
disclosure to the Director of Investment Management or the Director's
designee by email when a sponsor supports a money market fund by
purchasing a security in reliance on rule 17a-9.\1386\ However, because
Part C of Form N-CR is more extensive and defines ``financial support''
more broadly than the current requirements, we expect that the costs
associated with filing a report in response to a Part C event would be
higher than the current estimated costs of compliance with the current
notification requirement.\1387\
---------------------------------------------------------------------------

    \1383\ See supra section III.F.3. (Definition of Financial
Support).
    \1384\ See supra section III.F.3 and note 1242.
    \1385\ See Proposing Release, supra note 25, at paragraph
following n.733.
    \1386\ Current rule 2a-7(c)(7)(iii)(B).
    \1387\ As previously noted, we are eliminating the existing
email notification requirements in rule 2a-7 and are replacing it
with the notification requirements of Form N-CR. See supra note
1213. We discuss the impact on costs of this elimination in sections
III.F.8 and III.N.3.
---------------------------------------------------------------------------

    In updating our proposed estimates for Part C of Form N-CR, we
estimate the costs of filing and amending the report in response to an
event specified on Part C of Form N-CR to include time costs of $6,660
and external costs of $1,400, for total costs of $8,060 for each set of
initial and follow-up reports,\1388\ and we expect, based in part by
reference to our estimate of the average number of notifications of
security purchases in reliance on rule 17a-9 that money market funds
currently file each year, that the Commission would receive
approximately 30\1389\ such filings per year.\1390\ Therefore, we
expect that the annual costs relating to filing a report on Form N-CR
in response to an event specified on Part C would be $241,800.\1391\
---------------------------------------------------------------------------

    \1388\ The costs associated with filing Form N-CR in response to
an event specified on Part C of Form N-CR are paperwork-related
costs and are discussed in more detail in infra section IV.D.2.c.
    \1389\ In the Proposing Release, we originally estimated 40
filings per year under Part C of Form N-CR. See Proposing Release,
supra note 25, at n.735 and accompanying text. As discussed in supra
section III.F.3, today we are adopting certain exclusions from the
definition of financial support that will narrow the definition to a
certain degree. Correspondingly, in anticipation of a slight
reduction in instances that meet the definition as amended today, we
predict an estimated 30 filings per year under Part C of Form N-CR.
    \1390\ See Submission for OMB Review, Comment Request,
Extension: Rule 2a-7, OMB Control No. 3235-0268, Securities and
Exchange Commission [77 FR 236 (Dec. 7, 2012)].
    \1391\ These estimates are based on the following calculations:
$8,060 (cost per complete filing) x 30 filings per year = $241,800
per year. See supra note 1388-1390 and accompanying text.
---------------------------------------------------------------------------

e. Operational Costs of Part D: Shadow Price Declines
    In an event of filing, we continue to believe a fund's particular
circumstances that gave rise to a reportable event under Part D would
be the predominant factor in determining the time and costs associated
with filing a report on Form N-CR, in particular with respect to the
follow-up filing amending the initial report.\1392\
---------------------------------------------------------------------------

    \1392\ See Proposing Release, supra note 25, at paragraph
following n.736.
---------------------------------------------------------------------------

    In updating our proposed estimates for Part D of Form N-CR, we
estimate the costs of filing and amending the report in response to an
event specified on Part D of Form N-CR to include time costs of $4,830
and external costs of $1,000, for total costs of $5,830 for each set of
initial and follow-up reports,\1393\ and we expect, based in part by
reference to our estimate of the average number of instances in which
the shadow price for a non-institutional money market fund has deviated
downward by more than \1/4\ of 1 percent from its stable per share NAV
price each year, that we will receive approximately 0.3 such filings
per year.\1394\ Therefore, we expect that the annual costs relating to
filing a report on Form N-CR in response to an event specified on Part
D would be $1,749.\1395\
---------------------------------------------------------------------------

    \1393\ The costs associated with filing Form N-CR in response to
an event specified on Part D of Form N-CR are paperwork-related
costs and are discussed in more detail in infra section IV.D.2.d.
    \1394\ Our staff has analyzed form N-MFP data from November 2010
to February 2014 and found that only one non-institutional fund had
a \1/4\ of 1 percent deviation from the stable $1.00 per share NAV.
1 fund in over 39 months is equivalent to less than 1 (1 x 12 / 39 =
0.31) funds per year. In the Proposing Release, we had estimated
0.167 reports filed per year in respect of Part D. See Proposing
Release, supra note 25, at n.1205. We revised this estimate to
reflect more accurate accounting and updated data.
    \1395\ These estimates are based on the following calculations:
$5,830 (cost per complete filing) x 0.3 filings per year = $1,749
per year. See supra note 1393 and 1394 and accompanying text.
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f. Operational Costs of Part E and F: Imposition of Fees and Gates
    In addition to the general discussion above, in updating our
estimates we also considered certain changes from the proposal
specifically related to Parts E and F of Form N-CR,\1396\ most notably
our changes to the board disclosure requirements \1397\ and the weekly
liquid asset thresholds permitting or triggering board consideration of
a liquidity fee or gate.\1398\ Moreover, in particular with respect to
the board disclosures, we expect that most if not all funds may engage
legal counsel to assist with the drafting and review of Form N-CR,
thereby incurring additional external costs. \1399\ We have also
revised our estimates of the frequency of filings under Parts E and
F.\1400\ In an event of filing, we continue to believe a fund's
particular circumstances that gave rise to a reportable event under
Parts E or F would be the predominant factor in determining the time
and costs associated with filing a report on Form N-CR, in particular
with respect to the follow-up filing amending the initial report.\1401\
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    \1396\ See supra section III.F.5.
    \1397\ See supra section III.F.5. (Board Disclosures).
    \1398\ See supra section III.F.5. (Conforming and Related
Changes).
    \1399\ For example, commenters cited the particular burdens and
the role of the board in drafting and reviewing the board
disclosures in Parts E and F. See, e.g., IDC Comment Letter (``Any
public disclosure about a board's decision-making process would
require careful and thoughtful drafting and multiple layers of
review (by board counsel, fund counsel, and the directors, among
others).''); Stradley Ronon Comment Letter; SIFMA Comment Letter.
    \1400\ See infra notes 1410-1414 and accompanying text.
    \1401\ See Proposing Release, supra note 25, at paragraph
following n.736.
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    In revising our estimates for Part E of Form N-CR,\1402\ we
estimate the costs of filing and amending the report in response to an
event specified on Part E of Form N-CR to include time costs of $10,910
and external costs of $3,600, for total costs of $14,510 for each set
of initial and follow-up reports.\1403\ The Proposing Release and the
DERA Study analyzed the distribution of weekly liquid assets to
determine how often a prime fund's weekly liquid asset percentage fell
below the 30% and 10% thresholds. The analysis found that on

average 6.9 out of 253 prime funds, or 2.7% of the funds, had their
monthly weekly liquid assets percentages fall below 30%.\1404\ This
corresponds to 83 funds per year.\1405\ The analysis also found that on
average 0.05 out of 253 prime funds, or 0.02% of the funds, had their
monthly weekly liquid assets percentages fall below 10%.\1406\ This
corresponds to 0.6 funds per year.\1407\ As a result of the new
reporting requirements, we believe that funds will in general try to
avoid having to file Form N-CR by keeping their weekly liquid asset
percentages above 10%.\1408\ In addition, of the 83 funds per year that
reported a weekly liquid assets value below 30%, it is unclear how many
would have decided to impose a fee, but we expect it to be lower than
83 funds given that not all boards would have likely imposed such a
discretionary fee. As such, we expect, based on our calculation of the
average number of instances in which a fund would breach the 10% and
30% weekly liquid asset threshold each year, that the Commission would
receive between 0.6 and 83 such filings per year. For purposes of the
Paperwork Reduction Act section below,\1409\ we estimate that 0.6 funds
per year would file a report triggered by the 10% weekly liquid asset
threshold\1410\ and an additional 0.6 funds per year would file a
report because they crossed the 30% weekly liquid asset threshold and
their board determined to impose a liquidity fee,\1411\ for a total
average of 1.2 instances per year. Therefore, we expect that the annual
costs relating to filing a report on Form N-CR in response to an event
specified on Part E will be $17,412.\1412\
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    \1402\ The Proposing Release estimated that a fund would spend
on average approximately 5 burden hours and total time costs of
$1,708 to prepare, review, and submit a report under any Part of
Form N-CR, including Part E. See Proposing Release, supra note 25,
at nn.1203 and 1204 and accompanying text.
    \1403\ The costs associated with filing Form N-CR in response to
an event specified on Part E of Form N-CR are paperwork-related
costs and are discussed in more detail in infra section IV.D.2.e.
    \1404\ See the table in the Proposing Release, supra note 25,
referencing n.384; DERA Study, supra note 24, at 22.
    \1405\ We estimate 83 funds per year as follows: 6.9 funds per
month x 12 months = 83 funds per year.
    \1406\ See the table in the Proposing Release, supra note 25,
referencing n.384; DERA Study, supra note 24, at 22.
    \1407\ We estimate 0.6 funds per year as follows: 0.05 funds per
month x 12 months = 0.6 funds per year.
    \1408\ See generally, e.g., SIFMA Comment Letter (``[Some
members] believe the existence of the liquidity trigger for the fee
and gate will motivate fund managers to maintain fund liquidity well
in excess of the trigger level, to avoid triggering the fee or
gate.'');
    \1409\ See infra section IV.D.2.e. In the Proposing Release, we
had previously estimated a total of 4 reports in response to Parts E
and F based on the previously proposed 15% weekly liquid asset
trigger. See Proposing Release, supra note 25, at n.1202. For a more
detailed discussion of the reasons for our changed estimates, see
also infra note 2408.
    \1410\ As noted above, as a result of the new reporting
requirements, we believe that funds will in general try to avoid
having to file Form N-CR by keeping their weekly liquid asset
percentages above 10%. Accordingly, we believe our estimates of the
frequency of filings in response to Part E of Form N-CR are likely
to be high. However, we are using these higher estimates to be
conservative in our analysis.
    \1411\ As discussed in section IV.D.2.e, we estimate that funds
will voluntarily impose a liquidity fee at most as often as they
will be required to consider a liquidity fee based on the 10% weekly
liquid asset trigger. Accordingly, the Commission conservatively
estimates that 0.6 additional funds per year would file a report in
response to Part E because it breached the 30% weekly liquid asset
threshold and their board determined to impose such a discretionary
liquidity fee.
    \1412\ These estimates are based on the following calculations:
$14,510 (cost per complete filing) x [0.6 + 0.6] filings per year =
$17,412 per year. See supra notes 1403-1410 and accompanying text.
---------------------------------------------------------------------------

    In revising our estimates for Part F of Form N-CR,\1413\ we
estimate the costs of filing and amending the report in response to an
event specified on Part F of Form N-CR of Form N-CR to include time
costs of $10,910 and external costs of $3,600, for total costs of
$14,510 for each set of initial and follow-up reports.\1414\ As stated
above, the DERA study found that 83 prime funds per year had their
weekly liquid asset percentages fall below 30%.\1415\ Of these 83
funds, it is unclear how many would have decided to impose a gate, but
we expect it to be lower than 83 funds given that not all boards would
have likely imposed such a discretionary gate. Thus, we expect, based
on our calculation of the average number of instances in which a fund
would breach the 30% weekly liquid asset threshold each year, that the
Commission would receive between zero and 83 such sets of initial and
follow-up reports per year. For purposes of the Paperwork Reduction Act
section below,\1416\ we conservatively estimate that 0.6 funds per year
would file a report because they breached the 30% weekly liquid asset
threshold and their board determined to impose a gate.\1417\ Therefore,
we expect that the annual costs relating to filing a report on Form N-
CR in response to an event specified on Part F would be $8,706. \1418\
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    \1413\ The Proposing Release estimated that a fund would spend
on average approximately 5 burden hours and total time costs of
$1,708 to prepare, review, and submit a report under any Part of
Form N-CR, including Part F. See Proposing Release, supra note 25,
at nn.1203 and 1204 and accompanying text.
    \1414\ The costs associated with filing Form N-CR in response to
an event specified on Part F of Form N-CR are paperwork-related
costs and are discussed in more detail in infra section IV.D.2.f.
    \1415\ See DERA Study, supra note 24, at 22.
    \1416\ See infra section IV.D.2.f. In the Proposing Release, we
had previously estimated a total of 4 reports in response to Parts E
and F based on the previously proposed 15% weekly liquid asset
trigger. See Proposing Release, supra note 25, at n.1202. For a more
detailed discussion of the reasons for our changed estimates, see
also infra note 2421.
    \1417\ As discussed and estimated in more detail in infra
section IV.D.2.f, we conservatively estimate the number of instances
in which a fund breached the 30% weekly liquid asset threshold and
its board determined to impose a voluntary gate to be equal to the
number of instances in which a fund breached the 30% weekly liquid
asset threshold and its board determined to impose a voluntary fee,
or 0.6 instances per year.
    \1418\ These estimates are based on the following calculations:
$14,510 (cost per complete filing) x 0.6 filings per year = $8,706
per year. See supra notes 1414-1417.
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g. Operational Costs of Part G: Lifting of Fees and Gates
    As discussed in the Proposing Release, we continue to believe the
frequency of filings under Part G on Form N-CR to be closely correlated
to the frequency of filings under Parts E and F.\1419\ Given our
revised estimates of the number of filings under Parts E and F,\1420\
we are correspondingly revising our estimate of the number of filings
under Part G.\1421\ We are further revising our estimates for Part G,
because we expect the cost per filing associated with responding to
Part G to be lower than for Parts E or F.\1422\ Unlike Parts B through
F and H, for which we have included estimated external costs to account
for the possibility that funds may engage legal counsel to assist in
the preparation and review of Form N-CR,\1423\ we have not done so here
because of the relative simplicity of Part G.
---------------------------------------------------------------------------

    \1419\ See, e.g., Proposing Release, supra note 25, at n.1202
and accompanying discussion. We expect there to be a close
correlation because Part G requires disclosure of the lifting of any
liquidity fee or gate imposed in connection with Part E or F.
    \1420\ See supra notes 1410 and 1417 and accompanying
discussions.
    \1421\ See infra section IV.D.2.g. The Proposing Release
estimated a total of 4 reports in response to Part G. See Proposing
Release, supra note 25, at n.1202. For a more detailed discussion of
the reasons for our revised estimates, see also infra notes 2433-
2437 and accompanying text.
    \1422\ In the Proposing Release, our staff originally estimated
that a fund would spend on average approximately 5 burden hours and
total time costs of $1,708 to prepare, review, and submit a report
under any Part of Form N-CR. See Proposing Release, supra note 25,
at nn.1203 and 1204 and accompanying text. However, we expect a
response to Part G to be shorter than under Parts E or G, given that
Part G only requires disclosure of the date on which a fund removed
a liquidity fee and/or resumed Fund redemptions. See Form N-CR Item
G.1. In addition, unlike Part E or F, Part G would not require any
follow-up report.
    \1423\ See supra sections IV.D.2.b--IV.d.2.f; see also infra
section IV.D.2.h.
---------------------------------------------------------------------------

    In revising our estimates for Part G of Form N-CR,\1424\ we
estimate the costs of

filing a report in response to an event specified on Part G of Form N-
CR to include time costs of $695 per filing,\1425\ and we expect, based
in part by reference to our estimate of how often funds would file Form
N-CR under Part E or F each year, that the Commission would receive
between zero and 83 such filings per year.\1426\ For purposes of the
Paperwork Reduction Act section below, we estimate that 1.8 funds per
year would file a report because they lifted a liquidity fee or
gate.\1427\ Therefore, we expect that the annual costs relating to
filing a report on Form N-CR in response to an event specified on Part
G would be $1,251.\1428\
---------------------------------------------------------------------------

    \1424\ The Proposing Release estimated that a fund would spend
on average approximately 5 burden hours and total time costs of
$1,708 to prepare, review, and submit a report under any Part of
Form N-CR, including Part F. See Proposing Release, supra note 25,
at nn.1203 and 1204 and accompanying text.
    \1425\ The costs associated with filing Form N-CR in response to
an event specified on Part G of Form N-CR are paperwork-related
costs and are discussed in more detail in infra section IV.D.2.g.
    \1426\ For purposes of this estimate of filings under Part G, we
conservatively assume that there would be a filing under Part G for
every filing under either Parts E or F. Given that some affected
funds may liquidate instead of ever lifting the respective liquidity
fee or gate, we therefore expect this estimate of the frequency of
Part G filings may be high.
    \1427\ See infra section IV.D.2.g.
    \1428\ These estimates are based on the following calculations:
$695 (cost per complete filing) x 1.8 filings per year = $1,251 per
year. See supra notes 1425-1427 and accompanying text.
---------------------------------------------------------------------------

h. Operational Costs of Part H: Optional Disclosure
    Given the broad scope and voluntary nature of the optional
disclosure under Part H of Form N-CR, we believe that, in an event of
filing, a fund's particular circumstances that led it to decide to make
such a voluntary disclosure would be the predominant factor in
determining the time and costs associated with filing a report on Form
N-CR. In estimating costs, we expect that some funds may engage legal
counsel to assist with the drafting and review of Form N-CR, thereby
incurring additional external costs.\1429\
---------------------------------------------------------------------------

    \1429\ In particular, we expect that funds are more likely to
file a report on Part H when there are more complex events that need
to be addressed, which we believe will make it correspondingly more
likely that funds will engage legal counsel.
---------------------------------------------------------------------------

    Accordingly, we estimate the costs of a filing in response to an
event specified on Part H of Form N-CR to include time costs of $1,390
and external costs of $800, for a total cost of $2,190 per
filing,\1430\ and we expect that the Commission will receive
approximately 18 such filings per year.\1431\ Therefore, we expect that
the annual costs relating to filing a report on Form N-CR in response
to an event specified on Part H will be $32,850.\1432\
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    \1430\ The costs associated with filing Form N-CR in response to
an event specified on Part H of Form N-CR are paperwork-related
costs and are discussed in more detail in infra section IV.D.2.h.
    \1431\ For purposes of our estimate in section IV.D.2.h below,
we conservatively estimate that funds would include a disclosure
under Part H in about a quarter of the instances they submit a
follow-up filing under Parts B through F, as well as with respect to
a quarter of all filings under Part G. Because of the timing
constraints, we generally would not expect funds would to make a
Part H disclosure in an initial filing. We also would not generally
expect funds to make a Form N-CR filing under Part H alone. However,
given the possibility that funds might make a Part H disclosure in
the initial filing or on a stand-alone basis, we conservatively
estimate one additional Part H filing per year under each scenario.
As calculated in in section IV.D.2.h below, we therefore estimate an
annual total of 15 filings in response to Part H.
    \1432\ These estimates are based on the following calculations:
$2,190 (cost per complete filing) x 15 filings per year = $32,850
per year. See supra notes 1430 and 1431 and accompanying text.
---------------------------------------------------------------------------

i. Aggregate Operational Costs
    In the aggregate, we estimate that compliance with new rule 30b1-8
and Form N-CR would result in total annual time costs of approximately
$339,588\1433\ and total external costs of $80,780.\1434\ Given an
estimated 559 money market funds that would be required to comply with
new rule 30b1-8 and Form N-CR,\1435\ this would result in average
annual time costs of approximately $607 and average annual external
costs of $145 on a per-fund basis.\1436\
---------------------------------------------------------------------------

    \1433\ See infra note 2446.
    \1434\ See infra note 2447.
    \1435\ See supra note 2448.
    \1436\ See infra note 2449.
---------------------------------------------------------------------------

G. Amendments to Form N-MFP Reporting Requirements

    The Commission is today adopting amendments to Form N-MFP, the form
that money market funds use to report their portfolio holdings and
other key information to us each month. We use the information to
monitor money market funds and support our examination and regulatory
programs. Each fund must file the required information on Form N-MFP
electronically within five business days after the end of each month.
Currently, we make the information public 60 days after the end of the
month.\1437\ Money market funds began reporting this information to us
in November 2010.\1438\
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    \1437\ See current rule 30b1-7(b).
    \1438\ On average, 575 money market funds (excluding feeder
funds) filed Form N-MFP with us each month throughout 2013. Funds
reported information on approximately 67,000 securities on average
each month.
---------------------------------------------------------------------------

    Today we are amending Form N-MFP to reflect the amendments to rule
2a-7 discussed above. In addition, we are requiring the reporting of
certain new information that will be useful for our oversight of money
market funds, and making other improvements to the form based on our
previous experience with filings submitted to us. Most commenters
generally supported the proposed amendments to Form N-MFP, agreeing
that the improved reporting would be useful to the Commission and
investors.\1439\ Although these commenters generally supported the
proposed amendments, many of them raised concerns with certain specific
changes and additional reporting items.\1440\ We did not receive any
comment on a number of the proposed amendments, and are generally
adopting those amendments as proposed.
---------------------------------------------------------------------------

    \1439\ See, e.g., Wells Fargo Comment Letter; ICI Comment Letter
(``We generally support the proposed amendments. . .''); Boston
Federal Reserve Comment Letter. One commenter opposed the amendments
generally, suggesting that Form N-MFP is a tool for the Commission,
not investors, and argued that the cost of the greater reporting
requirements is not justified by the usefulness of the information
to the Commission. See Dreyfus Comment Letter. We discuss the
usefulness of the information reported on Form N-MFP to investors
throughout this section, and similarly discuss the costs of
compliance in section III.G.5. below.
    \1440\ See, e.g., Wells Fargo Comment Letter (objecting to
shareholder flow reporting); Fidelity Comment Letter (objecting to
lot level purchase and sale data); SIFMA Comment Letter (objecting
to shareholder concentration reporting).
---------------------------------------------------------------------------

    To respond to comments we received, the final form amendments
differ in some respects from what we proposed, such as not adopting the
lot level security and shareholder concentration reporting
requirements, as well as certain other refinements which are discussed
below. We are adopting many of the other proposed amendments unchanged,
including eliminating the 60-day delay on public availability of the
data. As proposed, we are not changing the requirement that funds
continue to file reports on Form N-MFP once each month (as they do
today), but are adopting a requirement that certain limited information
(such as the NAV per share, liquidity levels, and shareholder flow) be
reported on a weekly basis within the monthly filing.\1441\
---------------------------------------------------------------------------

    \1441\ We requested comment on potentially requiring filing of
Form N-MFP on a weekly, rather than a monthly basis. Commenters
generally opposed such an increase in frequency of filing of the
form, and we are retaining the requirement to file the form on a
monthly basis at this time. See, e.g., Dreyfus Comment Letter; SIFMA
Comment Letter.
---------------------------------------------------------------------------

    We are adopting these changes to Form N-MFP because they further
support the Commission's efforts to oversee the stability of money
market funds and compliance with rule 2a-7,\1442\ and should assist
money

market fund shareholders in better understanding the risks of their
investments. As proposed, in connection with these amendments, we are
renumbering the items of Form N-MFP to separate the items into four
separate sections and are making other minor reformatting
changes.\1443\ These amendments will apply to all money market funds,
with both stable value and floating NAV money market funds reporting on
Form N-MFP as amended.
---------------------------------------------------------------------------

    \1442\ References to amended Form N-MFP will be to ``Form N-MFP
Item'' or to ``Item'' and references to Form N-MFP as it was
proposed to be amended in 2013 will be to ``Proposed Form N-MFP
Item.'' We are not amending items in Form N-MFP that reference
credit ratings at this time.
    \1443\ See Form N-MFP: (i) General information (Items 1-8); (ii)
information about each series of the fund (Items A.1-A.21; (iii)
information about each class of the fund (Items B.1-B.8); and (iv)
information about portfolio securities (Items C.1-C.25). Our
renumbering of the items will enable us to add or delete items in
the future without having to re-number all subsequent items in the
form.
---------------------------------------------------------------------------

1. Amendments Related to Rule 2a-7 Reforms
    We proposed a number of changes to Form N-MFP designed to conform
it with the general reforms of rule 2a-7.\1444\ Commenters generally
did not object to these proposed amendments, and we are adopting them
largely as proposed, with some revisions to reflect the revised
approach we are taking to the primary reforms.
---------------------------------------------------------------------------

    \1444\ See Proposing Release supra note 25, at section III.H.1.
---------------------------------------------------------------------------

a. Amortized Cost
    As part of the primary reforms to rule 2a-7, we proposed to
eliminate the use of the amortized cost valuation method for stable
value money market funds, and to correspond with that elimination, we
also proposed to remove references to amortized cost and shadow prices
from Form N-MFP. However, as discussed previously in section II.B.5,
the final amendments will permit the continued use of the amortized
cost valuation method for stable value money market funds.\1445\
Accordingly, to conform the changes to Form N-MFP to the final
amendments to rule 2a-7, we are not adopting the Form N-MFP amendments
that would have removed references to the amortized cost of securities
in certain existing items, although we are moving and rephrasing the
references where appropriate to be consistent with the final amendments
to rule 2a-7.\1446\
---------------------------------------------------------------------------

    \1445\ See supra section II.B.5.
    \1446\ Form N-MFP currently requires that each series of a fund
disclose the total amortized cost of its portfolio securities (Item
13) and the amortized cost for each portfolio security (Item 41). As
we proposed, we are amending Items 13 and 41 by replacing amortized
cost with ``value'' as defined in section 2(a)(41) of the Act
(generally the market-based value). See Form N-MFP Items A.14.b and
C.18, and Form N-MFP General Instructions, E. Definitions. As a
result, we are removing current Form N-MFP Items 45 and 46, which
require that a fund disclose the value of each security using
available market quotations, both with and without the value of any
capital support agreement. Form N-MFP Item C.18 would require that
money market funds report portfolio security market values both
including and excluding the value of any sponsor support. As we
proposed, to improve transparency of MMF's risks, we are also
clarifying that money market funds must disclose the value of ``any
sponsor support'' applicable to a particular portfolio security,
rather than ``capital support agreements'' as stated in current Form
N-MFP Items 45 and 46. We are also continuing to require, as
proposed, reporting of the amortized cost value of money market
funds that use that method to value securities for all or any
portion of their portfolio. See Form N-MFP Item A.14.b.i .
---------------------------------------------------------------------------

    Because we proposed to eliminate amortized cost valuation (which
would have required all money market funds to value their shares at
market-based values even if they transacted at a dollar through penny
rounding), we had correspondingly proposed to eliminate the reporting
requirements related to money market fund ``shadow prices'' from Form
N-MFP and instead require funds to report their market-based NAV. As a
result of the final amendments to rule 2a-7 permitting the continued
use of amortized cost for certain money market funds, the final
amendments to Form N-MFP also continue to require reporting of fund
shadow prices (on a series and class level) for funds that use the
amortized cost method of valuation.\1447\ This requirement would be
part of the requirement to report the fund's NAV on a class and series
level.
---------------------------------------------------------------------------

    \1447\ See Form N-MFP Items A.20 and B.5. These requirements are
moved and reformatted from the existing form as part of the overall
renumbering and re-organizing of the form.
---------------------------------------------------------------------------

b. Weekly Reporting Within Monthly Filing
    The final rules also require reporting of a money market fund's NAV
per share (and shadow price), daily and weekly liquid assets, and
shareholder flows on a weekly basis within the monthly filing of the
form, as we proposed.\1448\ Two commenters generally objected to the
proposed requirements for weekly reporting within a monthly form.\1449\
These commenters argued that weekly information gathering will increase
fund costs and suggested that the benefits are speculative. They also
noted that this weekly reported information would be available on the
fund's Web site, resulting in redundant disclosure.\1450\ We appreciate
these concerns, but disagree. Form N-MFP and Web site disclosure have
different purposes. Under our final disclosure amendments, as discussed
above funds will be required to report market-based NAV per share
information daily on their Web sites (as well as the liquidity and
shareholder flow information), so the weekly information should be
readily available at little additional cost. Including this weekly
information on the fund's filing will allow Commission staff to better
monitor risks and trends in fund valuation (as well as liquidity and
shareholder flow) in an efficient and more precise manner without
requiring frequent visits to the Web sites of many different funds, and
will be a useful resource for investors and others as well. Because it
will be housed in a central repository of data, this information can be
aggregated and analyzed across the fund industry and can be used in a
standardized manner to enhance comparability.\1451\ The additional data
points we collect will enable us to better monitor trends and risks on
a more granular time level for individual funds and money market funds
as a whole. In contrast, the Web site disclosures are intended to be
more accessible and ``user-friendly'' than Form N-MFP for individual
investors trying to research particular funds. We have required other
such parallel reporting for similar reasons.\1452\
---------------------------------------------------------------------------

    \1448\ Form N-MFP Items A.13, A.20, B.5 and B.6. As discussed in
section IV.A.6.c funds would also be required to report their NAV
per share and shadow price on a daily basis on their Web site.
    \1449\ Dreyfus Comment Letter; SIFMA Comment Letter. These
commenters objected to all of the proposed weekly items, including
reporting on the funds' NAV per share, levels of daily and weekly
liquid assets, and shareholder flows.
    \1450\ Id.
    \1451\ See also supra section III.F.
    \1452\ For example, money market funds are currently required to
disclose much of the portfolio holdings information they disclose on
Form N-MFP on the fund's Web site as well. See current rule 2a-
7(c)(12)(ii); Form N-MFP General Instruction A.
---------------------------------------------------------------------------

c. NAV Per Share (and Shadow Price) Reporting to Fourth Decimal Place
    Today on Form N-MFP, funds report, both for each series and each
class, shadow price of their NAV, rounded to the fourth decimal place
for a fund with a $1.00 share price (or an equivalent level of accuracy
for funds with a different share price).\1453\ Under the proposed
amendments to the Form, we proposed to keep this reporting requirement
(although in a different place within the Form consistent with the
general reformatting). This reporting is consistent with the rounding
convention that was proposed for floating NAV money market funds to
price and transact in our rule proposal. No commenters specifically
addressed this current Form N-MFP requirement, or its reformatting. As
discussed in section III.B.3.c above we are adopting a requirement for
floating NAV funds to transact at this ``basis point rounding''

level of accuracy. As when we originally adopted this requirement in
2010, we continue to believe that information about a fund's NAV priced
to a basis point rounding level of accuracy will be relevant and useful
for the Commission and investors when monitoring money market fund
risks and trends.\1454\ This information will be used by the Commission
and others to identify money market funds that continue to seek to
maintain a stable price per share \1455\ and help us better evaluate
any potential deviations in their unrounded share price. Reporting the
NAV per share to the fourth decimal place on Form N-MFP is also
consistent with the precision of NAV reporting that funds would be
required to provide on their Web sites under our final amendments.
Accordingly, the Form continues to require reporting of a money market
fund's NAV to the fourth decimal place, as is required today and under
the proposal.\1456\
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    \1453\ Form N-MFP Items 18 and 25. See also Proposing Release
supra note 25, at section III.H.1.
    \1454\ See 2010 Adopting Release, supra note 81, at section
II.E.2. We note that many large fund complexes already disclose on
their Web sites the daily money market fund market valuations (i.e.,
shadow prices) of at least some of their money market funds, rounded
to four decimal places (``basis point'' rounding), for example,
BlackRock, Fidelity Investments, and J.P. Morgan. See, e.g., Money
Funds' New Openness Unlikely to Stop Regulation, Wall St. J. (Jan.
30, 2013). See also sections III.B and IV.A.6.
    \1455\ We are also adopting, as proposed, a new item requiring
reporting for funds that seek to maintain a stable price per share
to state the price that the fund seeks to maintain. See Form N-MFP
Item A.18.
    \1456\ Form N-MFP Items A.20 and B.5.
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d. Category Reporting
    As we proposed, we are also amending the category options at the
series level that money market funds use to identify themselves to
include exempt government fund as an option.\1457\ We are also adding a
sub question, new from the proposal, asking if the fund is an exempt
retail fund under rule 2a-7.\1458\ This new subsection is necessary to
help identify whether a fund is exempt because it is a government fund
or if it is exempt because it is a retail fund which will be important
in our ongoing monitoring efforts. These new categories will allow us
to better identify the types of funds operating.
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    \1457\ See Form N-MFP, Item A.10.
    \1458\ See Form N-MFP, Item A.10.a.
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e. Economic Analysis
    Consistent with the proposal, any effect resulting from these
amendments (except as noted below), including the requirement that each
monthly report include information on a weekly basis, is included in
our economic analysis of our amendments that require money market funds
to disclose NAV, liquidity and shareholder flow daily on fund Web
sites.\1459\ Accordingly, we do not believe that the proposed
amendments would impose other costs not discussed in that section on
money market funds other than those required to modify systems used to
aggregate data and file reports on Form N-MFP, as discussed below. We
expect, as discussed previously in this section, that the revised forms
will benefit investors by enhancing their understanding of money market
funds, and will enhance our monitoring and regulatory programs.
---------------------------------------------------------------------------

    \1459\ See supra section III.E.9.h.
---------------------------------------------------------------------------

    We believe that the revised form will be easier for investors to
understand because the amendments will allow investors to better focus
on a single market-based valuation for individual portfolio securities
and the fund's overall NAV per share. Accordingly, we expect that the
overall effects will be to increase efficiency for investors. Because
we believe that investors are likely to make at least incremental
changes to their trading patterns in money market funds due to the
changes to Form N-MFP, it is likely that the changes will affect
competition and capital formation. Although it is difficult to quantify
the size of these effects without better knowledge about how investors
will respond, we believe that the effects from the changes to Form N-
MFP will be small relative to the effects of the underlying reforms.
2. New Reporting Requirements
    We are also adopting several new items to Form N-MFP that we
believe will improve our (and investors') ability to monitor money
market funds. As discussed further below, these final amendments
include some, but not all of the new reporting requirements that we had
proposed. For example, as proposed, the final amendments include
additional information about fair value categorization and LEIs (if
available). We are also adopting, with some changes from the proposal,
revisions to several other items, including revised investment
categories for portfolio securities and repurchase agreement
collateral. However, we are not adopting the lot level portfolio
security disclosure, top 20 shareholder information, and security
identifier level reporting on repo collateral that we had proposed.
These amendments we are adopting should help address gaps in data that
have become apparent from analysis of Form N-MFP filings that we have
received to date. As discussed further below, each amendment requires
reporting of additional information that should be readily available to
the fund and, in many cases, should infrequently change from report to
report.
a. Security Identifiers
    Certain of the final amendments we are adopting today are designed
to help us and investors better identify fund portfolio
securities.\1460\ To facilitate monitoring and analysis of the risks
posed by funds, it is important for Commission staff to be able to
identify individual portfolio securities. Fund shareholders and
potential investors that are evaluating the risks of a fund's portfolio
will similarly benefit from the clear identification of a fund's
portfolio securities. Currently, the form requests information about
the CUSIP number of a security, which the staff uses as a search
reference. The staff has found that some securities reported by money
market funds lack a CUSIP number, and this absence has reduced the
usefulness of other information reported.\1461\ To address this issue,
we are adopting as proposed the requirement that funds also report the
LEI that corresponds to the security, if available.\1462\ We are also

adopting as proposed final amendments that require that funds report at
least one other security identifier, if available.\1463\ One commenter
suggested that the proposed requirement to include multiple securities
identifiers might not be possible for certain securities, such as
municipal securities, which may only have a single identifier
available.\1464\ We note that the requirement to include multiple
identifiers is only required if such identifiers are actually
available.\1465\
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    \1460\ We also are also adopting, as proposed, a requirement
that a fund provide the name, email address, and telephone number of
the person authorized to receive information and respond to
questions about Form N-MFP from Commission staff. We will exclude
this information from Form N-MFP information that is made publicly
available through EDGAR. See Form N-MFP Item 8.
    \1461\ Our inability to identify specific securities, for
example, limits our ability to compare ownership of the security
across multiple funds and monitor issuer exposure. As discussed in
the proposal, during the month of February 2013, funds reported
6,821 securities without CUSIPs (approximately 10% of all securities
reported on the form).
    \1462\ See Form N-MFP Item C.4; Form N-MFP General Instructions,
E. Definitions (defining ``LEI''). To ensure accurate identification
of Form N-MFP filers and update the Form for pending industry-wide
changes, we are also requiring, as proposed, that each registrant
provide its LEI, if available. See Form N-MFP Item 3. The Legal
Entity Identifier is a unique identifier associated with a single
corporate entity and is intended to provide a uniform international
standard for identifying counterparties to a transaction. The
Commission has begun to require disclosure of the LEI, once
available. See, e.g., Form PF, Reporting Form for Investment
Advisers to Private Funds and Certain Commodity Pool Operators and
Commodity Trading Advisors, available at http://www.sec.gov/rules/final/2011/ia-3308-formpf.pdf. A global LEI standard is currently in
the implementation stage. See Frequently Asked Questions: Global
Legal Entity Identifier (LEI) (Feb. 2013), U.S. Treasury Dept.,
available at http://www.treasury.gov/initiatives/ofr/data/Documents/LEI_FAQs_February2013_FINAL.pdf. Consistent with staff guidance
provided in a Form PF Frequently Asked Questions, available at
http://www.sec.gov/divisions/investment/pfrd/pfrdfaq.shtml, funds
that have been issued a CFTC Interim Compliant Identifier (``CICI'')
by the Commodity Futures Trading Commission may provide this
identifier in lieu of the LEI until a global LEI standard is
established.
    \1463\ See Form N-MFP Item C.5 (requiring that, in addition to
the CUSIP and LEI, a fund provide at least one additional security
identifier, if available). Security identifiers should be readily
available to funds. See, e.g., http://www.sec.gov/edgar/searchedgar/cik.htm (providing a CIK lookup that is searchable by company name).
We are also requiring that a fund provide the LEI (if available) for
a security subject to a repurchase agreement (but unlike under the
proposal, not the CUSIP). See Form N-MFP Items C.8.
    \1464\ See Vanguard Comment Letter.
    \1465\ Form N-MFP Items C.4 and C.5.
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b. Fair Value Categorization
    We are also adopting, with certain modifications from the proposal
described below, amendments that are designed to help the staff and
investors better identify certain risk characteristics that the form
currently does not capture. Responses to these new items, together with
other information reported, would improve the staff and investors'
understanding of a fund and its potential risks by providing
information about how the fund is valuing its investments.
    We proposed to require funds to report whether a security is
categorized as a level 1, level 2, or level 3 measurement in the fair
value hierarchy under U.S. GAAP.\1466\ We noted in the Proposing
Release that we understood that most money market fund portfolio
securities are categorized as level 2, and that although we understood
that very few of a money market fund's portfolio securities are
currently valued using significant unobservable inputs, and thus
categorized as level 3, information about any such securities would
enable our staff to identify individual securities that may be more
susceptible to wide variations in pricing.\1467\ We also discussed how
Commission staff could use this information to monitor for increased
valuation risk in these securities, and to the extent there is a
concentration in the security across the industry, identify potential
outliers that warrant additional monitoring or investigation. One
commenter objected to the requirement to report the fair value level of
portfolio securities, arguing that because most money market fund
securities are categorized as level 2, a more efficient approach would
be to only require disclosure if a security is categorized as level
3.\1468\ We agree that because most money market fund securities are
categorized as level 2, the relevant information for us and investors
is whether the security is categorized as level 3, and that it would be
simpler and less costly for funds to report whether a security is
categorized as level 3, rather than the level used for each security in
the fund's portfolio. Accordingly, the final amendments require funds
to disclose whether a security is categorized at level 3, not the fair
value level of each security.\1469\ We believe that most funds directly
evaluate the fair value level measurement categorization when they
acquire the security and reassess the categorization when they perform
portfolio valuations.\1470\ Accordingly, we continue to believe that
funds should have ready access to the nature of the portfolio security
valuation inputs used.
---------------------------------------------------------------------------

    \1466\ See Accounting Standards Codification 820, ``Fair Value
Measurement''; Proposed Form N-MFP Item C.20. Level 1 categorized
measurements include quoted prices for identical securities in an
active market. Level 2 categorized measurements include: (i) Quoted
prices for similar securities in active markets; (ii) quoted prices
for identical or similar securities in non-active markets; and (iii)
pricing models whose inputs are observable or derived principally
from or corroborated by observable market data through correlation
or other means for substantially the full term of the security.
Security measurements categorized as level 3 are those whose value
cannot be determined by using observable measures (such as market
quotes and prices of comparable instruments) and often involve
estimates based on certain assumptions.
    \1467\ For a discussion of some of the challenges regulators may
face with respect to Level 3 accounting, see, e.g., Konstantin
Milbradt, Level 3 Assets: Booking Profits and Concealing Losses, 25
Rev. Fin. Stud. 55,95 (2011).
    \1468\ See Federated VIII Comment Letter.
    \1469\ Form N-MFP Item C.20.
    \1470\ Funds should regularly evaluate the pricing methodologies
used and test the accuracy of fair value prices (if used). See
Accounting Series Release No. 118, Financial Reporting Codification
(CCH) section 404.03 (Dec. 23, 1970).
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c. Lot Level Reporting
    We proposed to require funds to report additional information about
each portfolio security, including, in addition to the total principal
amount, the purchase date, the yield at purchase, the yield as of the
Form N-MFP reporting date (for floating and variable rate securities,
if applicable),\1471\ and the purchase price.\1472\ This information
would have been required to be reported separately for each lot
purchased.\1473\ In addition, we proposed to require that money market
funds disclose the same information for any security sold during the
reporting period.\1474\ In the Proposing Release, we suggested that
because money market funds often hold multiple maturities of a single
issuer, each time a security is purchased or sold, price discovery
occurs and an issuer yield curve could be updated and used for
revaluing all holdings of that particular security. Therefore, our
proposed amendments, if adopted, could have had the incidental benefit
of facilitating price discovery and would have enabled the Commission,
investors, and others to evaluate pricing consistency across funds (and
identify potential outliers).\1475\
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    \1471\ We understand that the yields on variable rate demand
notes, for example, may vary daily, weekly, or monthly. Our
amendments would have provided Commission staff and others with a
way to monitor the market's response to changes in credit quality,
as well as identify potential outliers.
    \1472\ See proposed N-MFP Item C.17. Because yield at purchase
would be disclosed in a separate item, we proposed to delete the
reference to ``(including coupon or yield)'' from current Form N-MFP
Item 27 (Form N-MFP Item C.2). Because as discussed below, we are
not adopting the lot level reporting requirements we proposed, we
are retaining the reference to coupon in the title of the issue.
However, to facilitate use of the data collected and to clarify the
time that the yield of the security must be calculated (as of the
Form N-MFP reporting date), we are moving the question about yield
out of the title question and adopting it as a standalone response.
See proposed N-MFP Item C.17. When disclosing a security's coupon or
yield (as required in proposed Form N-MFP Items C.2 or C.8.e), funds
generally should report (i) the stated coupon rate, where the
security is issued with a stated coupon, and (ii) the coupon rate as
of the Form N-MFP reporting date, if the security is floating or
variable rate. Because we not adopting the lot level reporting
requirement, funds would not need to report, as discussed in the
proposal, the interest rate at purchase. Finally, funds generally
should disclose the name of the collateral issuer (and not the name
of the issuer of the repurchase agreement).
    \1473\ See proposed Form N-MFP Item C.17.
    \1474\ See proposed Form N-MFP Item C.25.
    \1475\ See Comment Letter of the Presidents of the 12 Federal
Reserve Banks (Feb. 12, 2013) (available in File No. FSOC-2012-0003)
(``Federal Reserve Bank Presidents FSOC Comment Letter''), supra
note 48 (suggesting that more frequent reporting on Form N-MFP might
increase price discovery for market-based NAV calculations).
---------------------------------------------------------------------------

    A number of commenters strongly opposed this proposed new lot level
reporting requirement.\1476\ They noted that the number of reporting
line items could go up tenfold under this requirement, and that costly
new systems would need to be built to effectively report this
information on an ongoing basis.\1477\ Commenters also

noted that the lot level security information is proprietary, and could
be used to the disadvantage of funds and shareholders.\1478\ They also
questioned the value of this information to the Commission, noting the
high costs of providing it.\1479\ We appreciate the concerns of
commenters, and are modifying the final amendments to eliminate the
proposed lot level security reporting requirement. Although collecting
data on the purchase and sale of money market fund securities could
improve pricing transparency, and allow us to better monitor risks and
valuation issues, we are persuaded by commenters that reporting this
information at the lot level may be costly and could disclose
proprietary information about security purchase prices that could harm
funds, and therefore their shareholders. We also believe that this data
might be more useful if collected on a systematic, market-wide basis
which may both provide more comprehensive and consistent coverage and
mitigate the concerns about proprietary data disclosure.\1480\
Accordingly, we are not adopting the lot level purchase and sale data
reporting requirements that we proposed.
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    \1476\ See, e.g., ICI Comment Letter; Federated II Comment
Letter; Wells Fargo Comment Letter.
    \1477\ See, e.g., Dreyfus Comment Letter; Fidelity Comment
Letter (noting that for one fund, one month's reporting included 336
lines at the CUSIP level, and under the proposed lot level
requirement, that fund would have contained over 2100 reporting
lines, and that of those lots, only 15 were purchased at different
yields, and 11 of those were Treasury securities).
    \1478\ See, e.g., Vanguard Comment Letter; BlackRock II Comment
Letter.
    \1479\ See, e.g., ICI Comment Letter (``Indeed, our members have
expressed concern that the reporting of this type of confidential
trading information could compromise management of their
portfolios.''); Fidelity Comment Letter.
    \1480\ One commenter discussed a similar approach, suggesting
that ``price discovery might be enhanced through other methods, such
as increasing the categories of securities reported through the
Financial Industry Regulatory Authority's Trade Reporting and
Compliance Engine (TRACE) system.'' Wells Fargo Comment Letter.
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d. Liquidity and Shareholder Flow Data
    We are also adopting amendments, with certain modifications from
the proposal as described below, that require funds to report the
amount of cash they hold,\1481\ the fund's daily liquid assets and
weekly liquid assets,\1482\ and whether each security is considered a
daily liquid asset or weekly liquid asset.\1483\ Unlike the other items
of disclosure on Form N-MFP that must be disclosed on a monthly basis,
as discussed previously, we are requiring that funds report their Daily
Liquid Assets and Weekly Liquid Assets on a weekly basis.\1484\ One
commenter suggested that we align reporting of fund liquid assets on
Form N-MFP (which is dollar based) with the reporting of liquid assets
on fund Web sites (which is percentage based).\1485\ We agree that such
alignment would provide better consistency and comparability of
information between information on fund's Web site and the information
reported on Form N-MFP. Accordingly, the final amendments to Form N-MFP
require reporting of fund daily and weekly liquid assets on both a
dollar and percentage basis.\1486\ Because the percentages are already
reported on fund Web sites, this information should be readily
available. The information should help us and others to better
understand the relative liquidity of fund portfolios.
---------------------------------------------------------------------------

    \1481\ See Form N-MFP Item A.14.a and Form N-MFP General
Instructions, E. Definitions (requiring, as proposed, disclosure of
the amount of cash held and defining ``cash'' to mean demand
deposits in insured depository institutions and cash holdings in
custodial accounts, respectively). We are also amending, as
proposed, Item 14 of Form N-MFP (total value of other assets) to
clarify that ``other assets'' excludes the value of assets disclosed
separately (e.g., cash and the value of portfolio securities). See
Form N-MFP Item A.14.c. This amendment would ensure that reported
amounts are not double counted.
    \1482\ See Form N-MFP Item A.13.
    \1483\ Form N-MFP Items C.21-C.22.
    \1484\ See supra note 1448.
    \1485\ Fidelity Comment Letter. Requiring both the total value
and percentage of total assets of these data points parallels the
information that is collected for each security in Items C.18 and
C.19 (dollar value and percentage basis).
    \1486\ Form N-MFP Items A.13.a-A.13.d. As discussed in section
III.G.2.i, we are not requiring disclosure of liquid assets on fund
Web sites on a dollar basis because we believe that the most
relevant information to investors is the percentage of fund assets
that are liquid.
---------------------------------------------------------------------------

    Similarly, we are adopting the proposed amendments to require that
money market funds disclose the weekly gross subscriptions (including
dividend reinvestments) and weekly gross redemptions for each share
class, once each week during the month reported.\1487\ As discussed
earlier, money market funds would continue to file reports on Form N-
MFP once each month, but certain information (including disclosure of
daily and weekly liquid assets) would be reported weekly within the
form. Several commenters objected to the requirement to disclose