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Federal R eserve Bank
OF DALLAS
WILLIAM H. WALLACE
F IR S T V IC E P R E S ID E N T
April 19, 1985
d allas.texas
75222
Circular 85-51
TO:
All depository institutions in the
Eleventh Federal Reserve District
SUBJECT
Final interpretation of Regulations D, H, and Q regarding money
market mutual funds
DETAILS
The Board of Governors has issued an interpretation of the definition
of deposit in Regulation D -- Reserve Requirements of Depository Institutions,
and Regulation Q -- Interest on Deposits, to exclude from the definition of
the term "deposit" repurchase agreements involving shares of a money market
mutual fund whose portfolio consists wholly of United States Treasury and
federal agency securities.
The Board of Governors also has issued an interpretation to
Regulation H -- Membership of State Banking Institutions in the Federal
Reserve System, to permit state member
banks to purchase sharesin a money
market mutual fund whose portfolio consists entirely of assets that the bank
may purchase directly. The change will become effective with the reserve
computation period beginning June 4, 1985.
ATTACHMENTS
Attached is the text of the Board's Federal Register document.
MORE INFORMATION
For further information, please call Robert Feil, at extension 6690,
or Evelyn Thomas, at extension 6132 for Regulation D; Marvin McCoy, at
extension 6657 for questions regarding
Regulation H, and Frances Bentsen, at
extension 6171 for questions regarding
Regulation Q.
Sincerely yours,
For additional copies of any circular please contact the Public Affairs Department at (214) 651 -6289. Banks and others are
encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).
This publication was digitized and made available by the Federal Reserve Bank o f Dallas' H istorical U braiy (FedHistory@ dalfrb.org)
FEDERAL RESERVE SYSTEM
R e g u l a t i o n s D, H, and Q
[12 C.F.R. P A R T S 204, 208, and 217]
[D o c ket No. R - 0 5 4 2 ]
RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
MEMBERSHIP OF STATE BANKING INSTITUTIONS
IN TH E F E D E R A L R E S E R V E S Y S T E M
INTEREST ON DEPOSITS
R e p u r c h a s e A g r e e m e n t I n v o l v i n g S h a r e s of a M o n e y M a r k e t M u t u a l
F u n d W h o s e P o r t f o l i o C o n s i s t s W h o l l y of U n i t e d S t a t e s T r e a s u r y
and F e d e r a l A g e n c y S e c u r i t i e s .
S t a t e M e m b e r B a n k P u r c h a s e of S h a r e s of a M o n e y M a r k e t M u t u a l
F u n d W h o s e P o r t f o l i o C o n s i s t s W h o l l y of S e c u r i t i e s that the
Bank M a y P u r c h a s e Direc t l y .
AGENCY:
B o a r d of G o v e r n o r s of the F e d e r a l R e s e r v e S y s t e m
ACTION:
Final Interpretation
S U M MARY: Th e B o a r d of G o v e r n o r s h a s i s s u e d an i n t e r p r e t a t i o n of
the d e f i n i t i o n of d e p o s i t in R e g u l a t i o n D — R e s e r v e R e q u i r e m e n t s
of
Depository
Institutions
(12
R e g u l a t i o n Q — I n t e r e s t on D e p o s i t s
CFR
Part
204)
and
(12 C F R Part 217) to e x c l u d e
f r o m the d e f i n i t i o n of the t e r m "deposit" r e p u r c h a s e a g r e e m e n t s
i n v o l v i n g s h a r e s of a m o n e y m a r k e t m u t u a l
consists
w h o l l y of U n i t e d
States
fund w h o s e p o r t f o l i o
T r e a s u r y and
federal agency
-
securities.
The
interpretation
Board
to
of
2-
Governors
Regulation
has
also
H —Membership
I n s t i t u t i o n s in the F e d e r a l R e s e r v e S y s t e m
of
issued
S t ate
an
Banking
(12 C F R Part 208)
to
p e r m i t s t a t e m e m b e r b a n k s to p u r c h a s e shares in a m o n e y m a r k e t
mutual
fund w h o s e p o r t f o l i o
consists
e n t i r e l y of a s s e t s
that
the b a n k m a y p u r c h a s e directly.
EFFECTIVE
DATE:
The
reserve
computation
period
beginning
J u n e 4, 1985.
F O R F U R T H E R I N F O R M A T I O N C ONTACT:
General
Counsel
Attorney
J. V i r g i l M a t t i n g l y ,
(2 0 2 / 4 5 2 -3430),
(202/452-2418),
or
Elaine
L e g a l Division,
the F e d e r a l R e s e r v e System, W a s h i n g t o n ,
SUPPLEMENTARY INFORMATION:
Banks,
banking;
curr e n c y ;
M.
Associate
B o utilier,
B oard of G o v e r n o r s of
D.C. 20551
List of S u b j e c t s in 12 C F R Part 204
Federal
Reserve
System;
penalties,
reporting requirements.
Pursuant
to its a u t h o r i t y under s e c t i o n s
the F e d e r a l R e s e r v e Ac t
(12 U.S.C.
s e q . ), the B o a r d a m e n d s 12 C F R Part
Part
208,
R e g u l a t i o n H and
9 and 19 of
§§ 321 et s e q . and 461
204,
12 C F R Part
R e g u l a t i o n D,
217,
et
12 C F R
R e g u l a t i o n Q as
follows:
1.
R e g u l a t i o n D (12 C F R Part 204)
is a m e n d e d by
a d d i n g a n e w s e c t i o n 2 0 4 . 1 2 4 as follows:
§204.124 — R e p u r c h a s e A g r e e m e n t I n v o l v i n g S h a r e s of a
Money Market Mutual
Fund Whose Portfolio Consists
W h o l l y of U n i t e d S t a t e s T r e a s u r y and F e d e r a l A g e n c y
Securities
-
3-
(a) T h e F e d e r a l R e s e r v e Act, as a m e n d e d b y the
M o n e t a r y C o n t r o l Act of 1980
Federal
reserve
(Title I of Pub.L.
requirements
on
transaction
96-221)
imposes
accounts
and
n o n p e r s o n a l time d e p o s i t s h e l d b y d e p o s i t o r y ins t i t u t i o n s .
Board
is e m p o w e r e d
obligations
s hall
under
be
Regulation D — Reserve
the Act
deemed
a
to d e t e r m i n e what
deposit
Requirements
of
(12
U.S.C.
Depository
The
types of
§ 461).
Institutions
e x e m p t s from the d e f i n i t i o n of "deposit" those o b l i g a t i o n s of a
depository
institution
that
arise
from
a
tran s f e r
of
direct
o b l i g a t i o n s of, or o b l i g a t i o n s that are f ully g u a r a n t e e d as to
p r i n c i p a l an d i n t e r e s t by,
the U n i t e d S t ates g o v e r n m e n t or a n y
a g e n c y t h e r e o f that the d e p o s i t o r y
repurchase
exemption
the
(12
CFR
§ 2 0 4 . 2 ( a ) (1)(v i i ) ( B )).
in R e g u l a t i o n Q - - I n t e r e s t
definition
of
i n s t i t u t i o n is o b l i g a t e d to
"deposit"
on
A
Deposits
obligations
that
parallel
exempts
evidence
from
an
i n d e b t e d n e s s a r i s i n g from a t r a n s f e r of d i r e c t o b l i g a t i o n s of,
or o b l i g a t i o n s
in t e r e s t by,
that ar e
fully guaranteed
and
The N a t i o n a l
Bank
Act
for
its
under
an d
restrictions
limitations
(12
U.S.C.
own
(12 C F R § 2 1 7 . 1 ( f ) ( 2 ) ) .
bank may purchase
prescribe
to p r i n c i p a l
the U n i t e d S t a t e s or a n y a g e n c y t h e r e o f that the
b a n k is o b l i g a t e d to r e p u r c h a s e
(b)
as
§ 24,
provides
account
U 7).
that
a national
investment
securities
as
The
the
Comptroller
statute
may
defines
i n v e s t m e n t s e c u r i t i e s to m e a n m a r k e t a b l e o b l i g a t i o n s e v i d e n c i n g
i n d e b t e d n e s s of a n y p e r s o n in the form of bonds, notes, and
4-
-
debentures.
T he A c t fu r t her limits a n a t i o n a l b a n k ' s h o l d i n g s
of a n y o n e
s e c u r i t y to no m o r e
percent
the b a n k ' s
of
capital
t h a n an
stock
amount
and
e q ual
surplus.
to
10
However,
t h e s e l i m i t a t i o n s d o not a p p l y to o b l i g a t i o n s i s sued b y the
United
States,
obligations
general
of
obligations
of
any
a gen c i e s .
In
addition,
fe d e r a l
state
and
certain
generally
a
n a t i o n a l b a n k is not p e r m i t t e d to p u r c h a s e for its o w n a c c o u n t
s t o c k of a n y
corporation.
state m e m b e r b a n k s
(c)
Th e
(12 U.S.C.
banks
open-end
investment
(i.e.,
to p u r c h a s e
restrictions
also
apply
to
§ 335).
Comptroller
national
par
These
of
the
Currency
for t heir
companies
has
own a c c o u n t s
that are p u r c h a s e d
money market mutual
permitted
funds) p r o v i d e d
s h ares
and
of
sold at
the p o r t f o l i o s
of s u c h c o m p a n i e s c o n s i s t s o l e l y of s e c u r i t i e s that a n a t i o n a l
bank
Board
may purchase
of
directly
Governors
pu r c h a s e ,
ha s
(Banking
permitted
to the e x t e n t p e r m i t t e d
sha r e s of m o n e y m a r k e t m u t u a l
consist
s o l e l y of
securities
p u r c h a s e d i r e c t l y (12 C.F.R.
(d)
Th e
Board
has
Bulletin
s tate
B-83-58).
member
banks
u nder a p p l i c a b l e
funds
that
("MMMF")
the
state
state
The
to
law,
whose portfolios
member
bank
may
§ 208.123).
determined
that
an
obligation
a r i s i n g from a r e p u r c h a s e a g r e e m e n t i n v o l v i n g shar e s of a M M M F
whose portfolio consists
wholly
of
securities
of
the U n i t e d
S t a t e s g o v e r n m e n t or an y a g e n c y t h e r e o f —^ w o u l d not be a
1/
Th e t e r m " U n i t e d S t a t e s g o v e r n m e n t or a n y a g e n c y thereof"
as u s e d h e r e i n shall h a v e the same m e a n i n g as in s e c tion
2 0 4 . 2 ( a ) ( 1 ) ( v i i ) (B) of R e g u l a t i o n D, 12 C.F.R.
§ 204.2(a)(l)(vii)(B).
-
"deposit"
for p u r p o s e s
of
5-
Regulations
D
and
Q.
The
B oard
b e l i e v e s that a r e p u r c h a s e a g r e e m e n t i n v o l v i n g shar e s of such a
MMMF
is the
directly
functional
involving
obligations.
A
equivalent
United
purchaser
of
States
of
a
repurchase
government
shares
of
a
agreement
or
MMMF
agency
obtains
an
i n t e r e s t in a p r o rata p o r t i o n of the a s s e t s that c o m p r i s e the
MMMF's
portfolio.
repurchase
Accordingly,
agreement
involves
regardless
United
of
States
whether
the
government
or
a g e n c y o b l i g a t i o n s d i r e c t l y or s h a r e s in a M M M F w h o s e p o r t f o l i o
consists
entirely
obligations,
an
of
United
equitable
and
S t a t e s and a g e n c y g o v e r n m e n t
Moreover,
the
Board
States
believes
government
undivided
interest
obligations
that
or
agency
in
United
is b e i n g t r a n s f e r r e d .
this
interpretation
will
f u r t h e r the p u r p o s e of the e x e m p t i o n in R e g u l a t i o n s D and Q for
repurchase
fe d e r a l
agreements
obligations
involving
by
United
enhancing
the
States
government
market
for
or
such
obligations.
L i s t of S u b j e c t s in 12 C F R Part 208
Banks,
requirements;
2.
b a n king;
Federal
Reserve
System?
reporting
sec u r i t i e s .
R e g u l a t i o n H (12 C F R Part 208)
is a m e n d e d by
a d d i n g a n e w s e c t i o n 2 0 8 . 1 2 3 as follows:
§ 2 0 8 . 1 2 3 — P u r c h a s e of S h a r e s of a M o n e y M a r k e t M u t u a l Fund
W h o s e P o r t f o l i o C o n s i s t s W h o l l y of S e c u r i t i e s that
the M e m b e r B a n k M a y P u r c h a s e D i r e c t l y
6-
-
(a)
The N a t i o n a l
Bank A c t
bank may purchase
for
its
under
an d
restrictions
limitations
prescribe
(12
U.S.C.
own
provides
§ 24,
account
H
that
a national
investment
securities
as
7).
the
The
Comptroller
statute
may
defines
i n v e s t m e n t s e c u r i t i e s to m e a n m a r k e t a b l e o b l i g a t i o n s e v i d e n c i n g
indebtedness
of a n y p e r s o n
debentures.
Th e A ct f u r t her limits a n a t i o n a l b a n k ' s h o l d i n g s
of a n y one
in the
s e c u r i t y to n o m o r e
form of bonds,
than an
amount
equal
p e r c e n t of the b a n k ' s c a p i t a l stock and surplus.
t h ese
limitations
United
States,
obligations
li m i t e d
of
d o not
to o b l i g a t i o n s
general
obligations
f ederal
agencies.
exc e p t i o n s ,
purchase
apply
a
national
for its o wn a c c o u n t
of
any
is
national
Th e
banks
Comptroller
to p u r c h a s e
of
for
the
Currency
t heir o w n
10
by
the
and
certain
with
certain
permitted
stock of a n y c o r p o r a t i o n .
r e s t r i c t i o n s a l s o a p p l y to s t ate m e m b e r b a n k s
(b)
to
issued
state
not
and
However,
In addition,
bank
notes,
(12 U.S.C.
has
accounts
to
These
§ 335).
permitted
shar e s
of
o p e n - e n d i n v e s t m e n t c o m p a n i e s that are p u r c h a s e d or sold at p a r
(i.e.,
money market mutual
such c o m p a n i e s
consist
funds)
solely
of
provided
securities
the p o r t f o l i o s
that
of
a national
bank may purchase directly.
(c)
The B o a r d of G o v e r n o r s has d e t e r m i n e d
state m e m b e r b a n k s
funds
("MMMF")
to p u r c h a s e
whose portfolios
s h ares
to p e r m i t
of m o n e y m a r k e t m u t u a l
consist
s o l e l y of
that the s t a t e m e m b e r b a n k m a y p u r c h a s e d i r e c t l y .
securities
The p u r c h a s e
b y a s t a t e m e m b e r b a n k of s h ares of such a M M M F is f u n c t i o n a l l y
equivalent
to
the
bank's
purchase
of
the
securities
that
-
comprise
shar e s
the p o r t f o l i o
of
interest
a MMMF
of
the MMMF.
acquires
an
in the s e c u r i t i e s
risks
or
A bank
undivided
that c o m p r i s e
M o r e o v e r , p u r c h a s e of shar es of
speculative
7-
wide
such
that
purchases
equitable
ownership
the M M M F p o r t f o l i o .
a M M M F w o u l d not resu l t in
fluctuations
because
the
bank
c u r r e n t l y m a y p u r c h a s e d i r e c t l y the a s s e t s c o m p r i s i n g the M M M F
portfolio
Exchange
greater
banks,
and
because
Commission
s cope
for
of
the
r u les
concerning
of
MMMFs.
diversification,
a l l o w i n g the p u r c h a s e of
to l o wer risk t h a n p u r c h a s e
by
the
Securities
Indeed,
by
particularly
such
and
providing
for
smal l e r
MMMFshares may contribute
the s tate
member
b a n k of
the
a s s e t s c o m p r i s i n g the M M M F p o r t f o l i o d irectly.
(d)
The B o a r d ha s
adopted
the
following
cond i t i o n s ,
si m i l a r to t h o s e a d o p t e d b y the C o m p t r o l l e r of the C u r r e n c y for
n a t i o n a l banks,
to e n s u r e that in t hose cases in w h i c h a s t ate
member bank may purchase
securities
ba n k d o e s
limitations
not
exceed
the
in l i m i t e d
indirectly
amounts,
the
through
the
p u r c h a s e of M M M F shares:
1.
The fund is an o p e n - e n d i n v e s t m e n t c o m p a n y
r e g i s t e r e d w i t h the S e c u r i t i e s and E x c h a n g e C o m m i s s i o n
under
the
Investment
S e c u r i t i e s A ct of
1933
Company
or
Act
of
a privately
1940
and
offered
fund
2/
s p o n s o r e d b y an a f f i l i a t e d c o m m e r c i a l b a n k . —
1/
T h i s p r o v i s i o n c o n c e r n i n g a p r i v a t e l y o f f e r e d fund
s p o n s o r e d b y an a f f i l i a t e d c o m m e r c i a l b a n k is a l i m i t e d
p r o v i s i o n a p p l i c a b l e o n l y to a p r i v a t e l y s p o n s o r e d fund of a
s u b s i d i a r y of a h o l d i n g c o m p a n y w h o s e shar e s m a y be p u r c h a s e d
o n l y b y o t h e r s u b s i d i a r i e s of the h o l d i n g company.
-8
2.
W h e n the fun d's a s s e t s c o n s i s t s o l e l y of and are
limited
to
obligations
that are
eligible
for
i n v e s t m e n t w i t h o u t limit b y a state m e m b e r bank,
is no limit on the b a n k ' s
i n v e stment.
there
But w h e r e
the
fund c o n t a i n s s e c u r i t i e s s u b j e c t to the b a n k ' s
investment
MMMF
may
or
lending
not
exceed
limitations.
shares
may
such
one
exceed
Where
member
fund
aggregate
t h ese
the
in
or
such
securities
investment
member
the
purchases
lending
investment
s tate
in the
l e n ding
bank
containing
i n v e s t m e n t or
d irectly,
investment
investment
investment
s t ate
the b a n k ' s
securities
allowable
the
bank's
no t
limitations.
these
than
to the
limitations,
funds
Where
in m o r e
subject
limitations,
or
lending
bank
purchases
aggregate
MMMF ( s )
in such
maximum
is
reduced
accordingly.
3.
The fund ' s s h ares are b o u g h t and sold at p a r
(i.e.,
the fund is a m o n e y m a r k e t fund).
4.
The
shareholder
proportionate
has
undivided
an
equitable
interest
in
and
the
equal
underlying
a s s e t s of the fund.
5.
S h a r e h o l d e r s are s h i e l d e d
for acts or
6.
by
from p e r s o n a l l i a b i l i t y
o b l i g a t i o n s of the fund.
The b a n k ' s i n v e s t m e n t policy,
its b o a r d of d i r e c t o r s ,
su c h
investments;
prior
as f o r m a l l y a p p r o v e d
specifically provides
approval
of
the
board
for
of
-
9-
directors
is
obtained
specific
funds
minut e s ;
an d p r o c e d u r e s ,
and
for
recorded
initial
in
the
standards,
investments
official
and
in
board
cont r o l s
for
the i m p l e m e n t a t i o n of such i n v e s t m e n t s are est a b l i s h e d .
7.
The b a n k c o n d u c t s r e v i e w s at least m o n t h l y of
its
h o l d i n g s of i n v e s t m e n t c o m p a n y shares to e n s u r e that
such i n v e s t m e n t s are
in a c c o r d a n c e w i t h the f o r e g o i n g
principles.
(e)
State member banks would
a l s o be s u b j e c t
o t h e r r e s t r i c t i o n s im p o s e d b y a p p l i c a b l e state law.
L i s t of S u b j e c t s in 12 C F R Part 217
Advertising;
banks,
bank i n g ;
Federal
Reserve
System;
f o r e i g n ba n king.
3.
Regulation Q
(12 C F R Part
217)
is a m e n d e d b y
a d d i n g a n e w s e c t i o n 217. 1 6 1 as follows:
§ 2 1 7 . 1 6 1 -- R e p u r c h a s e A g r e e m e n t s I n v o l v i n g S h a r e s of a M o n e y
M a r k e t M u t u a l Fund W h o s e P o r t f o l i o C o n s i s t s W h o l l y
of
United
States
Treasury
and
Federal
Agency
Securities
(a)
T h e F e d e r a l R e s e r v e Act, as a m e n d e d b y the
M o n e t a r y C o n t r o l Act of 1980
fe d e r a l
reserve
requirements
(Title I of Pub.L.
on
transaction
96-221)
accounts
imposes
and
n o n p e r s o n a l time d e p o s i t s h e l d b y d e p o s i t o r y i n s t i t u t i o n s .
Board
is e m p o w e r e d
u nder
the A c t
to d e t e r m i n e w h a t
o b l i g a t i o n s s h all be d e e m e d a d e p o s i t
(12 U.S.C.
The
types of
§ 461).
to a n y
-
Regulation D — Reserve
10-
Requirements
of
Depository
Institutions
e x e m p t s from the d e f i n i t i o n of "deposit" t h ose o b l i g a t i o n s of a
depository
institution
that
arise
from a
transfer
of d i r e c t
o b l i g a t i o n s of, or o b l i g a t i o n s that are f ully g u a r a n t e e d as to
p r i n c i p a l an d i n t e r e s t by,
the U n i t e d States g o v e r n m e n t or any
a g e n c y t h e r e o f that the d e p o s i t o r y
repurchase
exemption
the
(12
CFR
i n s t i t u t i o n is o b l i g a t e d to
§ 2 0 4 . 2 ( a )(1)(v i i ) ( B )).
in R e g u l a t i o n Q — I n t e r e s t
definition
of
" deposit"
A
parallel
on D e p o s i t s
obligations
that
exempts
from
evidence
an
i n d e b t e d n e s s a r i s i n g from a t r a n s f e r of d i r e c t o b l i g a t i o n s of,
or o b l i g a t i o n s
i n t e r e s t by,
that are
f u l l y g u a r a n t e e d as
the U n i t e d S t a t e s or a n y a g e n c y t h e r e o f
b a n k is o b l i g a t e d to r e p u r c h a s e
(b)
The N a t i o n a l
for
its o w n
under
and
restrictions
limitations
(12
U.S.C.
§ 24,
and
that the
(12 C F R § 217 . 1 ( f ) ( 2 ) ) .
bank may purchase
prescribe
to p r i n c i p a l
Bank
account
Act
investment
as
1f 7).
provides
the
The
that
securities
Comptroller
statute
a national
may
defines
i n v e s t m e n t s e c u r i t i e s to m e a n m a r k e t a b l e o b l i g a t i o n s e v i d e n c i n g
indebtedness
of a n y p e r s o n
in the
debentures.
Th e A c t fu r t her limits a n a t i o n a l b a n k ' s h o l d i n g s
of a n y one
s e c u r i t y to no m o r e
percent
the b a n k ' s
of
capital
form of bonds,
than
stock
an
amou n t
and
notes,
equal
surplus.
to
and
10
However,
t h ese l i m i t a t i o n s d o not a p p l y to o b l i g a t i o n s issued b y the
U n i t e d States,
general
obligations
o b l i g a t i o n s of f ederal a g e ncies.
of
any
state
and
certain
In addition, g e n e r a l l y a
-
11 -
n a t i o n a l b a n k is not p e r m i t t e d to p u r c h a s e for
its
own a c c o u n t
stock
of a n y c o r p o r a t i o n .
also
apply
s tate
member banks
(c) The
(12 U.S.C.
banks
open-end
investment
(i.e.,
to p u r c h a s e
restrictions
to
§ 335).
Comptroller
national
par
These
of
the
Currency
for t heir o w n
companies
that
money market mutual
has
accounts
are p u r c h a s e d
funds)
permitted
provided
shares
and
of
sold at
the p o r t f o l i o s
of such c o m p a n i e s con s i s t s o l e l y of s e c u r i t i e s that a n a t i o n a l
b a n k m a y p u r c h a s e d i r e c t l y (B a n k i n g B u l l e t i n B -83-58).
Board
of
purchase,
Governors
has
permitted
s o l e l y of s e c u r i t i e s
p u r c h a s e d i r e c t l y (12 C.F.R.
(d)
arising
Th e
Board
ha s
funds
that
consists
government
"dep o s i t "
or
banks
for p u r p o s e s
of
state
to
state
law,
whose portfolios
member
bank
may
§ 208.123).
determined
wholly
any
("MMMF")
the
from a r e p u r c h a s e a g r e e m e n t
whose portfolio
St a t e s
member
to the e x t e n t p e r m i t t e d under a p p l i c a b l e
shar e s of m o n e y m a r k e t m u t u a l
consist
s tate
The
of
agency
that
an
obligation
i n v o l v i n g s h ares of a M M M F
securities
of
the
United
t h e r e o f —^ w o u l d
not
be
The
Board
Regulations
D
and
Q.
a
b e l i e v e s that a r e p u r c h a s e a g r e e m e n t i n v o l v i n g s h ares of such a
MMMF
is the
functional
equivalent
of
a repurchase
agreement
d i r e c t l y i n v o l v i n g U n i t e d S t a t e s g o v e r n m e n t or a g e n c y
3/
Th e t e r m "U n i t e d S t a t e s g o v e r n m e n t or a n y a g e n c y thereof"
as used h e r e i n s h a l l h a v e the same m e a n i n g as in s e c t i o n
2 0 4 . 2 ( a ) ( 1 ) (vii)(B) of R e g u l a t i o n D, 12 C.F.R.
§ 204.2(a)(1)(vii)(B).
-
obligations.
A
purchaser
of
12 -
shares
of
a
MMMF
obtains
an
i n t e r e s t in a p r o rata p o r t i o n of the a s s e t s that c o m p r i s e the
MMMF's
portfolio.
repurchase
Accordingly,
agreement
involves
regardless
United
of
States
whether
the
government
or
a g e n c y o b l i g a t i o n s d i r e c t l y or shares in a M M M F w h o s e p o r t f o l i o
consists
entirely
obligations,
an
of
United
equitable
States
and
government
undivided
or
inte r e s t
agency
in
United
S t a t e s and a g e n c y g o v e r n m e n t o b l i g a t i o n s
is b e i n g t r a n s f e r r e d .
Moreover,
interpretation
the
Board
believes
that
this
will
f u r t h e r the p u r p o s e of the e x e m p t i o n in R e g u l a t i o n s D and Q for
repurchase
fed e r a l
agreements
obligations
involving
by
United
enhancing
the
States
market
government
for
such
obligations.
B y o r d e r of the B o a r d of G o v ernors, M a r c h 26, 1985.
(signed)
William W. Wiles
W i l l i a m W. W i l e s
S e c r e t a r y of the B o a r d
or
@FedFRASER