Prime MMFs play a dual role in corporate financing. First, the funds provide working capital to companies by buying their corporate debt and commercial paper. Second, companies put short-term cash into those funds. Regarding that second function, the requirement for a floating NAV—which must be reported to the nearest hundredth of a cent by a company investing in the Prime Fund—significantly complicates investments in Prime MMFs by corporate treasurers. “It introduces an element of uncertainty and recordkeeping complications that are not present in stable NAV funds,” says Thomas C. Deas, Jr., chairman of the National Association of Corporate Treasurers.

Business groups are pressing Congress to pass a version of the Consumer Financial Choice & Capital Markets Protection Act, introduced at the start of 2015 by Rep. Gwen Moore (D.-Wis.). The bill, supported by an equal number of Republicans and Democrats, never had a vote in the House Financial Services Committee last year because of a perceived veto by President Obama. President Trump is likely to be sympathetic to the bill.

About the Authors