Manage 2a-7 Processing
Rule 2a-7, established by the U.S. Securities and Exchange Commission (SEC), ensures the stability and liquidity of money market funds (MMFs). It imposes strict requirements on portfolio composition, maturity limits, credit quality, and valuation methods to minimize risk and maintain a stable net asset value (NAV) of $1.00.
Rule 2a-7 authorizes MMFs to use the amortized cost method or the penny-rounding method for asset valuation. However, funds must still conduct a market-value-to-amortized cost comparison for risk purposes, on a monthly basis. If the market value NAV of the fund risks falling below $1.00, the SEC must be notified. If the NAV drops to $0.9975, the board of directors must be notified to take action.
The European Money Market Fund Regulation (MMFR) governs MMFs within the European Union (EU), setting similar standards for liquidity, diversification, and valuation. MMFR categorizes MMFs into Variable Net Asset Value (VNAV), Constant Net Asset Value (CNAV), and Low Volatility Net Asset Value (LVNAV) funds.
Eagle’s mutual fund accounting solution provides a multi-step workflow for 2a-7 processing, ensuring that MMFs comply with the Rule 2a-7 regulatory standards. The system calculates market value, performs a cost-to-market value comparison, and determines a weighted average maturity for MMF holdings. It also assesses tier determination for each money market holding. The process includes enhancements for MMFR regulations, offering price comparison checks for LVNAV MMFs.