SEC bolsters money market fund rules

WASHINGTON (BestGrowthStock) – U.S. securities regulators adopted rules aimed at making money market funds a safer investment after the collapse of the Reserve Primary Fund triggered a run on the $3.24 trillion market in 2008.

The Securities and Exchange Commission on Wednesday voted to bolster the funds’ liquidity, limit their riskier investments and to show investors that the funds may not always maintain a stable $1 share value.

Money market funds were considered as safe as cash until the collapse of Lehman Brothers pushed the value of the Reserve Fund money market fund below $1 a share and wreaked havoc on the industry. The federal government was required to step in and create a program to backstop the market.

Under the new rules, net asset value — or value of each share of a money fund — would be disclosed on a 60-day lag basis and allow investors to follow a fund’s share price.

Under typical industry practices, money market funds offer shares at one dollar, even if the true value of a fund’s assets are a few tenths of a cent above or below a dollar.

The enhanced disclosures would let investors see which funds are taking risks and potentially push fund managers to take fewer risks that might cause wide variations to the true net asset value.

The SEC is also requiring money market funds to hold a minimum of 10 percent of their assets in liquid securities and shortening the average maturity of debt the funds can hold to 60 days from 90 days,

The largest managers of money market funds include Fidelity Investments, Federated Investors (FII.N: ) and JPMorgan Chase (JPM.N: ).

Stock Investing

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)

SEC bolsters money market fund rules