Schwab announces money market fund updates in light of SEC's reform

Schwab announces money market fund updates in light of SEC's reform
Firm joins slate of other managers adjusting retail and institutional money market funds to meet the new regulations borne out of financial crisis.
JUN 16, 2015
Charles Schwab Investment Management Friday announced updates to its money market funds in response to the reforms the Securities and Exchange Commission adopted last year to protect the funds from investor runs. The firm joins a slate of other managers that have recently announced adjustments to retail and institutional money market funds in order to meet the new regulations. The SEC's rules came about after the 2008 financial crisis forced a money market fund to “break the buck” and fall below the $1.00 net asset value. The money market fund reforms require a floating net asset value for institutional prime money market funds, where previously the NAV for money market funds was held at a constant. Liquidity fees and gates — restrictions that will bar investors from fleeing the funds — are also applicable, thanks to the regulations. Government funds are exempt from the gates and liquidity fees. In Schwab's case, the firm said its government money funds will not adopt a liquidity fee or redemption gate policy. Retail investors will also be able to access Schwab's prime, municipal and government money market funds with a constant NAV. Investors who are ineligible for the constant NAV prime and municipal money market funds under the new regulations will be granted access to floating NAV funds instead. News of Schwab's updates follow on the heels of other large firms adjusting their money market fund offerings to meet the SEC's rules. Fund families that have made updates to their money market fund offerings include BlackRock Inc., which told clients in April that it would shift retail clients' funds to government-investing funds from corporate debt. Fidelity Investments made a similar call earlier this year, when it requested that shareholders approve converting a trio of prime funds into government funds.

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