The rules will aim to make the funds less susceptible to runs that could harm investors.
The SEC’s proposal includes two principal alternative reforms that could be adopted alone or in combination. One alternative would require a floating net asset value (NAV) for prime institutional money market funds. The other alternative would allow the use of liquidity fees and redemption gates in times of stress. The proposal also includes additional diversification and disclosure measures that would apply under either alternative.
The SEC began evaluating the need for money market fund reform after the Reserve Primary Fund “broke the buck” at the height of the financial crisis in September 2008.
“Our goal is to implement effective reform that decreases the susceptibility of money market funds to runs and prevents events like what occurred in 2008 from repeating themselves,” said Mary Jo White, Chair of the SEC.A fact sheet about the proposal is here.