The Securities and Exchange Commission (SEC) recently proposed rule amendments that would eliminate references to credit ratings in Rules 2a-7 and 5b-3 under the Investment Company Act of 1940. Rule 2a-7 governs money market funds and Rule 5b-3 provides a look-through to certain repurchase agreements for purposes of meeting diversification requirements. The SEC reviewed these rules in response to the requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act that agencies review rules that use credit ratings as an assessment of creditworthiness, and replace those credit-rating references with other appropriate standards. In 2008, the Commission had proposed to similarly eliminate references to credit ratings in Rule 2a-7. That proposal was not adopted.
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