SEC Reportedly Set to Unveil Money Market Curbs

June 24, 2009 (PLANSPONSOR.com) - The Securities and Exchange Commission (SEC) is expected to unveil tighter proposed restrictions for money-market mutual funds, according to people who have been briefed, the Washington Post said.

According to the Post, the SEC proposals are expected to include:

  • A requirement that funds maintain 5% of their assets in cash or bonds that could be sold within a day to make it easier to fund quick redemptions.
  • A requirement that funds invest in only the highest-quality bonds, as judged by credit-rating firms. Currently, funds can invest in bonds of the highest level and second-highest level of quality.
  • Cutting the maximum maturity of bonds that funds can invest in. Currently, under SEC requirements, the average bond in a fund’s portfolio cannot mature in more than 90 days.

The Post said the agency is not expected to take more dramatic action that would have made these funds act more like traditional investment products.

The SEC will also seek public comments about the idea that money market funds be required to fluctuate in value, the sources said.

The agency’s proposals would come after the nearly $4-trillion market for money market funds faced a run last fall when the Reserve Primary Fund, one of the nation’s largest money market funds, “broke the buck.” The government pledged hundreds of billions of dollars to support the industry (see  Reserve Management Execs Accused of Fraud in Money Fund Debacle ).

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