Prime money markets funds are in trouble

- Morgan Stanley's wealth management division is under expanded federal investigation by multiple US regulators, including the SEC, OCC, and the Treasury, focusing on the vetting of risky clients and money laundering controls.

- The broadened probe into Morgan Stanley has adversely affected its share price, which fell more than 5% following the news, indicating serious market concerns over regulatory issues.

- New SEC regulations have prompted money managers to prepare for the shutdown or conversion of over $200 billion in US prime money market funds to prevent large-scale redemptions and maintain market stability.

- An EU court invalidated sanctions against Russian oligarchs Pyotr Aven and Mikhail Fridman over insufficient evidence connecting them to Russia's invasion of Ukraine, causing a significant disruption to the EU's sanctions regime.

- The court ruling in favor of Aven and Fridman opens the door for other Kremlin-linked individuals to challenge the validity of EU sanctions, potentially undermining the effectiveness of European punitive measures against Russian entities.

- The upcoming implementation of the SEC's regulatory changes for money market funds is expected to cause a significant decrease in the sector's size, posing challenges for commercial paper markets and investor diversification.

- Money managers are concerned about the costs and administrative burden associated with the new SEC rule, which may accelerate the closure and conversion of prime money market funds.

- The EU court's decision emphasizes the importance of solid and irrefutable evidence when imposing sanctions, suggesting that the EU may need to reassess its evidentiary standards and methods for targeting individuals with punitive measures.