On September 16, 2015, the SEC adopted a final rule that removes references to credit ratings from Rule 2a-7 under the Investment Company Act, the rule that governs money market funds, and from Form N-MFP, the form used by money market funds to report information to the SEC on their portfolio holdings.

The rule implements Section 939A of the Dodd-Frank Act. Section 939A requires federal agencies to review how existing regulations rely on credit ratings and remove those references when appropriate.

Under amended Rule 2a-7, a security having a rating in one of the two highest ratings categories is no longer a required element in determining whether a security is a permitted investment for a money market fund. Instead, the fund's board of directors, or its delegate, must determine that the security presents minimal credit risks to the fund. In making this determination, the board or its delegate must consider specified credit analysis factors listed in the rule.

The final rule also eliminates an exclusion from Rule 2a-7's issuer diversification provisions that is currently available for securities subject to a guarantee issued by a non-controlled person.

The final rule takes effect 30 days after publication in the Federal Register. The compliance date for the final rule is October 14, 2016.

For more information on the SEC's removal of references to credit ratings under the Dodd-Frank Act, see Practice Note, Summary of the Dodd-Frank Act: Credit Rating Agencies: Removal of Ratings References in Statutes and Regulations.