TAILIEUCHUNG - CURRENT DEVELOPMENTS FOR MUTUAL FUND AUDIT COMMITTEES QUARTERLY SUMMARY

More importantly, while most of the theoretical models which we use to evaluate mutual fund performance are based on the assumption of efficient markets, emerging markets fail to meet these assumptions. Returns in emerging markets suffer from several chronic conditions such as high volatility, high trading cost, non-normality, and infrequent trading (Bekaert and Harvey, 2002). Furthermore, there is still some doubt whether the factors documented in developed markets can also explain stock returns in emerging markets (for example, Claessens et al., 1995; Fama and French, 1998; Rouwenhorst, 1999; Barry et al., 2002; van der Hart et al., 2002). . | us assetmanagement March 31 2012 Current Developments for Mutual Fund Audit Committees Quarterly summary pwc Table of contents PwC articles observations for the three months ended March 31 2012 More money market fund reform 1 CFTC adopts new rules requiring advisors to investment companies 3 and private funds to register Regulatory developments 9 Tax developments Senate Permanent Subcommittee on Investigations hearing on 15 mutual fund investments in commodities Summary of developments for the six 17 months ended MarCh 31 2012 Publications of interest to mutual fund 20 directors issued during the three years ended March 31 2012 PwC PwC articles observations for the three months ended March 31 2012 More money market fund reform Money market funds prior to 2008 were rarely the topic of news headlines. However since the market turmoil of September 2008 during which one fund infamously broke the buck money market reform has been at the forefront of the SEC s agenda and there has rarely been a day without some sort of news story about money funds. In 2010 the SEC implemented several changes to Rule 2a-7 the rule under the Investment Company Act of 1940 that governs money market funds . The rule changes were designed to provide among other things greater liquidity and transparency into money market funds. However at that time the SEC made it clear that those changes were only an initial step and that further reform to money market fund regulation including potentially more significant changes would be proposed. At the direction of SEC Chairman Mary Schapiro currently the SEC is considering two alternatives 1 A floating NAV 2 Requiring a capital buffer to provide support to address losses in a money market fund. This would be combined with a 30-day hold on a specified percentage of amounts redeemed from a shareholder s account possibly 3 to 5 which would be charged with any losses in excess of the buffer to mitigate the incentive for investors to flee the fund

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