RIA Compliance Blog
The Securities and Exchange Commission (SEC) is looking into two new proposals to stabilize money market funds. One of Chairman Mary Schapiro’s goals is to address the core structural weaknesses of the market. She stated, “Funds remain vulnerable to the reality that a single money market fund breaking of the buck could trigger a broad and destabilizing run.” The SEC is hoping to put both plans out for public comment, but it believes that it may adopt only one of the plans. If it chooses to adopt one, then the SEC will propose it before the end of March.
The SEC’s first proposal is to adopt a floating net asset value instead of the traditional $1 share price. This idea was also mentioned back in 2009; however it was not implemented. The second proposal would require funds to maintain a 1% capital cushion designed to absorb potential losses and to hold back at least 3% of client redemptions for 30 days.
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