ESMA issues statement of coordination on external support of money market funds

MMFs may enter into transactions with third parties, including affiliated or related parties provided the requirements of Article 35 of the MMF Regulation are met. For that purpose, it is important to consider, in particular, the following requirements of Article 35 of the MMF Regulation:

  • point (b) of the second subparagraph of Article 35(2) of the MMF Regulation provides that external support shall include, amongst other examples, the “purchase by a third party of assets of the MMF at an inflated price”. For the purposes of examining whether a third party provides the external support referred to in that point, transactions with third parties relating to the assets of the MMF are not purchased at an inflated price where they are executed at arm’s length conditions; and
  • point (e) of the second subparagraph of Article 35(2) of the MMF Regulation provides that external support shall also include “any action by a third party the direct or indirect objective of which is to maintain the liquidity profile and the NAV per unit or share of the MMF”. An indication of the direct or indirect objective referred to in that point is where third parties execute transactions solely with the MMFs to which they are affiliated.

The full document is available at https://www.esma.europa.eu/sites/default/files/library/esma34-39-1096_esma_statement_mmf_art35.pdf

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