Vanguard believes that the SEC has the appropriate expertise and is the proper agency to develop rules regarding money market mutual funds. We do not believe that FSOC should make specific money market fund recommendations to the SEC. However, if FSOC does make recommendations to the SEC, they should only apply to Prime money market funds (those that invest primarily in banks, financial institutions, or operating companies) and not tax-exempt, municipal, or government agency funds.

Vanguard supports a proposal to require a standby liquidity fee (of 1-3%) to all Prime money market funds that would be triggered if a fund’s weekly liquidity dips below 15%. (Currently, money market funds are required to maintain 30% weekly liquidity.)

Vanguard believes that a standby liquidity fee would make retail Prime funds incapable of imposing systemic risk on the broader financial markets. If regulators remained concerned about risk posed by institutional Prime funds, we recommend that any further reform measures, such as additional liquidity, more frequent disclosure, or other options, be targeted to those funds.

Vanguard suggests that an account balance of $5 million would be an appropriate way to distinguish between retail and institutional prime money market funds. Balances of $5 million or less would be classified as retail accounts. Balances over $5 million would be institutional accounts (with the exception of retirement and college savings plan-level holdings).

Vanguard continues to oppose options to add capital buffers, require redemption holdbacks, or to float the NAV.