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Rating:Will the SEC Force Us to See Money Funds' Shadows? Not Rated 1.0 Email Routing List Email & Route  Print Print
Wednesday, January 27, 2010

Will the SEC Force Us to See Money Funds' Shadows?

News summary by MFWire's editors

Will Mary Schapiro and her colleagues force money market funds to abandon the $1-per-share standard? The SEC's commissioners are scheduled to vote on proposed money fund regulations, including floating net asset values, at an open meeting starting at 10 am on Wednesday morning. Yet Dow Jones' Fawn Johnson reports that the commission will keep the fixed NAV while requiring monthly disclosure of each money fund's "shadow price" (fluctuations around $1, with a 60-day lag).

Both Dow Jones and Reuters' Aaron Pressman and Rachelle Younglai report that the commission may require money funds to, on a daily basis, "hold a minimum of 10 percent of their assets in liquid securities" and, on a weekly basis, to boost that ratio to at least 30 percent. And Dow Jones also anticipates that the final rule will only limit money funds' exposure to "second-tier" securities (in terms of ratings) to only three percent overall (0.5 percent per security), with a maturity limit of 45 days (instead of 397).

The moves come 16 months after the now-infamous Reserve Primary Fund broke the buck (i.e. saw its NAV plunge below $1 without the Reserve being able to simply make up the difference out of its own pocket) in the wake of Lehman Brothers' collapse.

Here's the SEC's initial money market fund reform proposal (pdf), first published in June 2009. 

Edited by: Neil Anderson, Managing Editor


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