SEC floats small step in money market fund reform

The SEC under Mary Jo White floats one small step in money market fund reform with a proposal that would make only institutional prime funds float NAVs. It's a good deal for the likes of Vanguard, Schwab.
JUN 05, 2013
U.S. securities regulators are reviewing a proposal that would require the riskiest money-market mutual funds to adopt a floating share price, according to a person familiar with the matter. The proposal from the Securities and Exchange Commission would impose the change only on the type of funds that suffered a flood of investor redemptions in September 2008, when the $62.5 billion Reserve Primary Fund collapsed, said the person, who asked not to be identified because the proposal isn't public. Money funds currently keep a stable value of $1 a share and are used as cash-equivalent accounts by individuals, institutional investors and corporations. The riskiest funds, known as prime institutional, invest in short-term corporate debt and account for 35 percent of money-fund assets, according to the Washington-based Investment Company Institute, a trade group for the mutual-fund industry. A proposal to limit rule changes to institutional prime funds would be a victory for some companies, including Vanguard Group Inc. and Charles Schwab Corp. (SCHW), that called for sparing funds that invest only in government securities from new rules. SEC Chairman Mary Jo White said last week that the agency's goal was to mitigate the systemic risk posed by some money funds while preserving the product's value to investors. She said the proposal would be issued publicly soon but declined to say when. -- Bloomberg News --

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