The Securities and Exchange Commission today adopted amendments to the rules that govern money market mutual funds. The amendments make structural and operational reforms to address risks of investor runs in money market funds, while preserving the benefits of the funds.
As reported via SEC press release, today’s rules build upon the reforms adopted by the Commission in March 2010 that were designed to reduce the interest rate, credit and liquidity risks of money market fund portfolios. At the time the Commission adopted the 2010 amendments, it recognized that the 2008 financial crisis raised questions of whether more fundamental changes to money market funds might be warranted.
The new rules require a floating net asset value (NAV) for institutional prime money market funds, which allows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets and provide non-government money market fund boards new tools – liquidity fees and redemption gates – to address runs.
In the view of the SEC, "today’s reforms fundamentally change the way that money market funds operate. They will reduce the risk of runs in money market funds and provide important new tools that will help further protect investors and the financial system," said SEC Chair Mary Jo White.
The rules aim to discourage institutional investors from fleeing money funds en masse during periods of market tumult by training them to accept fluctuations in the value of their investments, and by ensuring funds sold to both institutional and individual investors have the ability to limit outflows..
The final rules provide a two-year transition period to enable both funds and investors time to fully adjust their systems, operations and investing practices.
Read more about the SEC's amendments in the SEC's Fact Sheet.