Skip to main content

New SEC Money-Market Rule Will Cover Very Few Money-Market Funds

  • Author:
  • Updated:

Following 2008’s little Lehman-induced hiccup in the industry, some folks had a radical idea: Maybe money-market funds should have to report their actual share price like everyone else, rather than the share price they aspire to. Well, that rule is still going on to the books, but you’ll have to try really hard to fall under its purview.

The Securities and Exchange Commission, poised to implement structural changes to money funds in coming months, is expected to broaden an exemption for mom-and-pop retail investors from requirements that certain money funds abandon their signature $1 share price and float in value like other mutual funds, these people said….

Under a broad exemption being discussed among staff and commissioners, funds catering only to retail investors could maintain stable $1 share prices, including tax-exempt funds that purchase short-term debt issued by states and localities, according to people familiar with the matter. Such funds weren't carved out in the June proposal, and several fund companies pressed the SEC to exclude them from the rules, arguing that they aren't susceptible to investor runs and provide an important source of short-term funding for states and localities.

The SEC is considering broadening the rule by changing the definition of which funds qualify as "retail." Rather than defining "retail" funds as those that allow investors to redeem $1 million or less on a daily basis, the agency plans to adopt a simpler method defining such funds as those limited to "natural persons," based on whether their investors have Social Security numbers or other factors. The move comes in response to large money-fund sponsors like Fidelity Investments and BlackRock Inc., which said the agency's proposed definition was unworkable, according to an October letter that the companies sent to the SEC.

SEC Set to Alter Stance on Money Funds [WSJ]