Friday, September 26, 2008

No Action Letter: Purchase of Asset-Backed Commercial Paper from Affiliates

On September 25, 2008, the staff of the Securities and Exchange Commission issued a no-action letter which allows banks to purchase asset-backed commercial paper in connection with the Federal Reserve's money market fund liquidity facility from affiliated money market funds.  The letter notes that, while funds may be able to sell asset-backed commercial paper to banks that are not affiliated persons, funds experiencing liquidity needs may not be readily able to establish arrangements with these banks to take advantage of the Fed facility. Earlier, the Federal Reserve adopted exemptions from Sections 23A and 23B of the Federal Reserve Act and Regulation W effectively eliminating any regulatory barriers to the use of an affiliated bank in connection with the money market fund liquidity facility.

A pdf of the no-action letter is available