March 26 U.S. securities regulators are
preparing to exempt a majority of money market mutual funds from
a central plank of rules intended to curb risks in the $2.6
trillion market, the Wall Street Journal reported, citing people
familiar with the matter.
Last June the SEC put forth a plan, mostly focusing on prime
funds for institutional investors, which called for two
alternative proposals that could be adopted alone or in
The first piece would require prime funds used by
institutional investors to transition from a stable $1 per share
to a floating NAV, while the second proposal would give fund
boards for institutional and retail funds the authority to
impose so-called "liquidity fees and redemption gates" during
times of stress.
However, under a broad exemption being discussed, the SEC
could allow retail money market funds to maintain stable $1
share prices instead of floating share prices, the Journal said.
Money funds invest in short-term debt instruments and are
designed to be safe and readily accessible to investors, who buy
and sell money market shares at a fixed price of $1 even though
the actual net asset value (NAV) per share may vary by a few
hundredths of a percent.
Investors' lack of information about the value and quality
of fund assets helped create a wave of panicked withdrawals from
money funds after Lehman Brothers went bankrupt in 2008.
Regulators say such a panic could recur unless more changes
are made, such as ending the fixed $1 per share price policy and
moving to floating share prices, like all other mutual funds.
The idea of a floating NAV is that investors are able to see
the fluctuations in a fund's value and can decide whether to be
more tolerant of the changes or leave the funds.
Last year, several U.S. money market fund managers,
including BlackRock Inc and Fidelity Investments, agreed
to start posting daily fund asset values as the industry comes
under growing pressure from regulators for more
The SEC was not available for comment outside regular U.S.
(Reporting by Supriya Kurane in Bangalore; Editing by Gopakumar