| Course | GF500 Financial Institutions and Markets |
|---|---|
| Unit | Unit 9 |
| Paper type | Regulatory response memo |
| Length | About 850 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF500 Unit 9
What Broke, Then What Changed: A Unit 9 Regulatory Response Memo on Money Market Fund Runs From 2008 to the 2023 Fee Rule
[Student Name]
Purdue University Global
GF500: Financial Institutions and Markets
Unit 9 Regulatory Response Memo
[Instructor Name]
[Date]
The committee and its holdings are composite; the events, dates, rules and article cited are real, with figures rounded.
Memorandum
To: Investment Committee From: Assistant Treasurer, Cash Management Date: September 8, 2025 Re: How money market fund rules evolved, and what they mean for our $85 million in prime funds
Bottom Line
Today's rules make a prime fund run less likely than in 2008 or 2020, but they do so partly by charging redeemers a fee when many leave at once. Our policy should treat prime funds as near-cash that may cost something to exit in a crisis, and keep same-day operating needs in government funds.
What Broke in 2008
The Reserve Primary Fund held about $785 million of commercial paper issued by Lehman Brothers. When Lehman filed for bankruptcy on September 15, 2008, that paper lost most of its value. The next day the fund's share value fell to 97 cents, below the one dollar at which money funds had always redeemed. Investors had already begun pulling money, and redemptions spread to other prime funds within days. The Treasury responded by guaranteeing money fund shares temporarily.
The mechanism was the fixed one-dollar share price. A fund carried its assets at amortized cost, so small losses did not show up in the price. Investors who redeemed early received a full dollar, while losses stayed with those who remained. That gave every investor a reason to leave first. Research on the episode found that institutional investors, who watch closely and move large sums, ran fastest and most heavily (Schmidt et al., 2016).
Rule 1: 2010 Liquidity Minimums
The SEC required taxable funds to hold at least 10 percent of assets in cash or securities maturing within a day and 30 percent within a week, and shortened permitted maturities. What it blocks: forced sales of illiquid paper at a loss to meet redemptions. What it leaves: the first-mover advantage of the fixed price.
Rule 2: 2014 Floating Prices, Fees and Gates
Institutional prime funds had to let their share price float with the market value of their assets, ending the fixed dollar for the investors most likely to run. All non-government funds could impose redemption fees of up to 2 percent or temporarily suspend redemptions, called gates, if weekly liquid assets fell below 30 percent (Money Market Fund Reform; Amendments to Form PF, 79 Fed. Reg. 47736, 2014). What it blocks: the hidden-loss advantage, and runs that would drain a fund completely.
What Broke Again in March 2020
In March 2020, as the pandemic hit markets, investors pulled roughly 30 percent of assets from institutional prime funds in about two weeks. The fee and gate rule helped cause it. Because a gate could be imposed once weekly liquid assets fell below 30 percent, investors raced to redeem before funds reached that line, and funds were reluctant to sell their liquid assets because doing so would push them toward it. The Federal Reserve stepped in with a lending facility to stop the outflows.
The 2014 gates were designed to stop a run once it started, but by tying them to a visible threshold they gave investors a new reason to run before the threshold was reached, which is why the 2023 rules removed gates entirely.
Rule 3: 2023 Amendments
The SEC removed redemption gates and broke the link between fees and liquidity thresholds. It raised minimum daily liquid assets to 25 percent and weekly liquid assets to 50 percent. Institutional prime and institutional tax-exempt funds must now charge a liquidity fee when net redemptions in a day exceed 5 percent of net assets, sized to the cost of selling assets to meet those redemptions, and other non-government funds may charge a discretionary fee (Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and Form N-1A, 88 Fed. Reg. 51404, 2023). What it blocks: the threshold race, and the shifting of selling costs from those who leave to those who stay.
What It Means for Us
Our $85 million sits in two institutional prime funds. Under the 2023 rules, if we redeem on a day of heavy outflows, we may pay a fee. That is the point of the rule: we would bear the cost our exit imposes. For daily operating cash, about $20 million, government money funds, which hold Treasuries and repurchase agreements backed by them and are exempt from mandatory fees, are the better home. The remaining $65 million can stay in prime funds for their higher yield, accepting a modest exit cost in a crisis.
Recommendation
Move $20 million of operating cash to a government fund this quarter, keep $65 million in prime funds, and update the investment policy to state that prime fund balances may carry a liquidity fee during market stress.
References
Money Market Fund Reform; Amendments to Form PF, 79 Fed. Reg. 47736 (Aug. 14, 2014).
Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and Form N-1A, 88 Fed. Reg. 51404 (Aug. 3, 2023).
Schmidt, L., Timmermann, A., & Wermers, R. (2016). Runs on money market mutual funds. American Economic Review, 106(9), 2625-2657. https://doi.org/10.1257/aer.20140678
Reading the GF 500 Unit 9 instructions
The ninth GF500 unit typically asks for a memo explaining how regulation responded to a market failure and what that means for a specific reader. Address the memo to a decision maker and put the bottom line first. Describe the failure as a mechanism, not only as an event, so the reader understands why the rule was needed. Present each regulation in order with its year and primary source, and say which behavior it stops and which it still allows. Where one rule contributed to a later failure, show the connection. Then apply the current rules to the reader's own position with figures, and finish with a recommendation the reader can act on. Use the agency's final rules or Federal Register citations rather than news summaries, and back the mechanism with a research article. Follow the memo format your instructor specifies and cite in APA 7.
How the GF 500 Unit 9 example is put together
A heading block and a two-sentence bottom line open the memo, so the committee knows the answer before the history. The 2008 section explains how amortized cost pricing let early redeemers leave whole, citing Schmidt, Timmermann and Wermers on institutional investors running fastest. Each rule then gets its own heading with a bolded line on what it blocks and, for the earliest, what it leaves. The March 2020 section shows how tying gates to a 30 percent liquidity threshold gave investors a reason to leave before the line was crossed, and the highlighted sentence makes that connection. The 2023 section lists the 25 and 50 percent liquidity minimums and the mandatory fee once net redemptions top 5 percent. The application splits $85 million into $20 million of operating cash for a government fund and $65 million left in prime funds. A one-sentence recommendation closes.
GF500 Unit 9 rubric: what earns full points
Most of the credit in this memo depends on accurate history explained as cause and effect. Graders check dates, thresholds and the order of the rules, and they reward primary citations to the Federal Register over secondhand sources. A large share of points goes to the mechanism: explaining why a fixed share price invited runs and why the 2014 gates encouraged a race shows understanding beyond a timeline. Applying the rules to the reader's holdings with numbers is what turns the memo into professional writing, and GF500 instructors grade that application closely. Format counts too, with a heading, a bottom line up front, short sections and a recommendation. Research support on investor behavior during runs and correct APA 7 references for legal sources complete the rubric.
Common GF500 Unit 9 mistakes, and how to avoid them
GF500 Unit 9 memos most often read as a list of rules with years and nothing linking them, which earns little for analysis. Some open with history and bury the recommendation at the end, the opposite of memo form. The failure is described as bad luck rather than a mechanism, so the rule seems arbitrary. Writers also confuse the 2014 and 2023 reforms, keeping gates that no longer exist. Many skip the reader's own position or apply the rules without figures. Legal sources are cited inconsistently. If your memo covers deposit insurance, bank capital after 2008 or liquidity rules after the 2023 regional bank failures, keep the same sequence: the breakage as a mechanism, each rule with what it blocks, how one rule shaped the next failure, and what it means for the reader.
Get a GF500 Unit 9 example written to your instructions
Your GF500 Unit 9 prompt may name a different failure, a bank run, a derivatives loss or a clearing breakdown, so send it along with the rubric. A custom memo comes back with the failure explained first and each rule matched to its target. The first sample is free and is usually ready in 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF500 Unit 9 questions, answered
Can the memo cover banking regulation instead?
Yes. Deposit insurance after the bank runs of the 1930s, capital rules after 2008, or liquidity requirements revisited after the 2023 regional bank failures all fit the same shape: the failure as a mechanism, then each rule beside the weakness it answers. Money market funds anchor the sample because their chain of failure, rule, new failure and revised rule is unusually clear.
How long should a regulatory memo be?
Your instructions set the length, and sections vary. The sample runs about three pages with a one-paragraph bottom line, which suits most committee formats. What matters more than length is that the conclusion appears first and every rule discussed connects to a failure the memo has already explained, so no provision appears without its reason.
Should the memo cite the actual regulations?
Yes, by name and year, and many rubrics expect primary sources where they exist. The SEC publishes its final rules and fact sheets, and those are more reliable than news summaries. In the sample each reform is cited by its adoption year and its provisions are described in plain language, leaving detailed rule numbers to a reference list at the end.
Where can I find a free GF500 Unit 9 sample paper?
A complete GF500 Unit 9 regulatory response memo is here, tracing money market fund rules from the 2008 run to the 2023 liquidity fees, with a recommendation and APA 7 references.
Why did the 2023 rules remove redemption gates?
Because in March 2020 investors rushed to redeem before funds reached the 30 percent weekly liquidity level that allowed a gate. The threshold itself became a reason to run.