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Mutual Funds and FSOC's Reproposed "Systemic" Designation Rule

On his FundLaw news group, Stradley Ronon's John Baker has prepared an excellent summary of FSOC's reproposed rule regarding designating nonbank financial institutions as systemically important and the impact this rule could have on mutual funds.   By way of background, the Dodd-Frank Act authorizes the Financial Stability Oversight Council (FSOC) to determine that certain nonbank financial companies are systemically important.  Such designation would subject a financial institution to supervision by the Federal Reserve Board and to enhanced prudential standards.  Baker writes that "[t]he FSOC reproposal should ease concerns that money market funds may be designated as systemically important, but the proposal leaves open the possibility that other funds and large asset management companies may be so designated, particularly if they have significant debt or enter into derivatives contracts."

The full text of the proposed rule can be found here.