The Federal Reserve Board (“FRB”) recently proposed rules to establish certain enhanced prudential standards under the Dodd-Frank Act for bank holding companies (“BHCs”) with $50 billion or more of assets (“Large BHCs”) and nonbank financial companies that are designated as systemically important financial institutions (“SIFIs”) (collectively, “Covered Companies”). Perhaps the most significant of these proposed rules is a set of limitations on counterparty credit exposure. Under the proposed rule, the credit exposure of a fund or other investment vehicle (“Fund”) generally would not be attributed to its sponsor or advisor. However, the FRB, noting the support that sponsors of money funds provided to their sponsored money funds during the financial crisis, has raised the possibility that the final rule could be modified to require the aggregation of the credit exposure of a Fund with that of its sponsor or advisor. Such aggregation could have significant consequences in regard to both the calculation of credit exposure and the management of compliance with such limitations. It also could impact a determination by the Financial Stability Oversight Council (“FSOC”) whether to consider the Funds that are sponsored or advised by a company when evaluating whether that company should be reviewed or ultimately designated as a SIFI. Parties that could be affected should consider filing comments. The comment deadline is March 31, 2012.

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