The Securities and Exchange Commission voted unanimously June 24 to propose rule amendments to require money market funds to maintain a portion of their portfolios in highly liquid investments, reduce their exposure to long-term debt, and limit their investments to only the highest quality portfolio securities.
The proposals, according to the SEC, also would require the monthly reporting of portfolio holdings, and allow the suspension of redemptions if a fund “breaks the buck” to allow for the orderly liquidation of fund assets. The Commission’s proposal requests comment on altering the current regime of the $1 stable net asset value (NAV) for money market funds.
In response to the proposal, the Investment Company Institute says it “continues to strongly oppose a move to floating NAVs because such a change would be so unpopular with investors that it would likely push them into riskier, less-regulated products.”
SEC Chairman Mary Schapiro stated at the June 24 open meeting that “these proposals are designed to increase the ability of money market funds to weather future economic storms.” She said “the stability of money market funds in times of turmoil is enormously important both for investors and for the securities markets. The proposals also would improve the operations of money market funds and oversight of their investments during calmer times, which can further protect funds and increase public awareness of potential risks.”