Federated Investors' shares down on fund rule concerns

* Most of Federated AUM in money funds

* Schwab shares also decline on report of SEC action

Feb 7 (Reuters) - Federated Investors Inc shares were down 5 percent in morning trading on concerns new rules could hurt its money- market mutual fund business.

The Wall Street Journal reported on Tuesday that the U.S. Securities and Exchange Commission was finalizing rules meant to stabilize the $2.7 trillion money-market mutual fund sector, which required much support from companies and federal agencies amid the financial crisis in 2008.

Asset manager Federated of Pittsburgh is among the largest managers of money-market funds, with $285.1 billion in such assets at the end of December out of its total managed assets of $369.7 billion. Its high percentage of money-market funds makes it vulnerable to changes in fund rules, and talk of a new SEC action sent the shares down, according to analysts Michael Kim of Sandler O'Neill and Jeff Hopson of Stifel, Nicolaus.

Fund industry executives have been consistent critics of the proposals under review by the SEC including the creation of capital buffers or allowing shares to "float" away from their traditional $1-per-share value. On a conference call with investors on Jan. 27, Federated Chief Executive Christopher Donahue suggested the company would file a lawsuit to block some new rules.

Shares in Charles Schwab Corp, another large money-fund provider, were also down in morning trading, Hopson noted.