* SEC mulls more disclosures for money mkt funds -source
* SEC to seek comment if floating NAV needed - source
* Agency eyes how to improve fund liquidity -source (Recasts, adds second source, details on liquidity, redemptions suspensions)
By Rachelle Younglai and Ross Kerber
WASHINGTON/BOSTON, June 23 (Reuters) - U.S. securities regulators are considering steps to boost money market funds' liquidity and protect investors after last year's sudden losses in industry pioneer Reserve Primary Fund, two sources familiar with the agency's thinking said on Tuesday.
Money market funds were long considered as safe as cash until the collapse of Lehman Brothers Holdings pushed the value of Reserve Fund below $1 a share, triggering a government program to backstop the $3.67 trillion market.
The Securities and Exchange Commission, which meets on Wednesday, may require more disclosure about money funds' assets as well as streamlining the process by which a fund's parent company can buy its distressed assets, the sources said.
The sources requested anonymity because the proposal was being crafted and could change before Wednesday's meeting. Any proposal needs approval from a majority of the five SEC commissioners for it to move forward.
The SEC is considering shortening the average maturity of debt that money market funds can hold. That would boost the funds' liquidity and help ensure investors are able to get their money out of a fund, if desired.
The idea of cutting the so-called weighted average maturity limit from its average 90 days is widely supported by the powerful mutual fund lobby, the Investment Company Institute. The ICI, which represents industry heavyweights like Fidelity Investments and Vanguard Group, has recommended cutting the average maturity on debt they can hold to 75 days.
The SEC may consider shortening the average to 60 days, one of the sources said.
Another step to improve liquidity would include requiring funds to hold a minimum of 5 percent in highly liquid assets such as cash or cash equivalents, one of the sources said. A retail money market fund could be required to hold a minimum of 5 percent, while an institutional fund could face a minimum of 10 percent in cash or cash equivalents, the source said.
The SEC may also propose that fund boards be allowed to suspend redemptions in extraordinary circumstances, one of the sources said.
Some of the SEC ideas under consideration are aligned with what the Obama administration has proposed to reduce the susceptibility of money market fund runs. It wants the SEC to consider requiring the funds to maintain liquidity buffers and reduce the maximum weighted average maturity, among other things.
The SEC is expected to issue a concept release on whether it should consider a floating net asset value instead of the current $1 NAV, or the level the fund needs to maintain in order to pay back its customers if they want to redeem their shares, the sources said.
A floating NAV, which could reflect actual assets held, could drive investors out of money market funds and into other financial products that protect the principal amount.
An SEC spokesman had no comment.
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* Washington regulatory news [WASH-REG-BNK-LEN-RTRS) (Reporting by Rachelle Younglai and Ross Kerber, editing by Leslie Gevirtz and Matthew Lewis)