Bloomberg writes the "SEC Said to Back Money Funds on Changes to Protect Investors", which says, "The U.S. Securities and Exchange Commission may support most of the proposals by asset managers to make money-market funds safer after last year's collapse of Reserve Primary Fund led to a run on the $3.5 trillion industry, according to people with knowledge the matter." The official proposed (not final) changes, expected soon, will be posted on the SEC's website.
The Bloomberg article, by Jesse Westbrook and Christopher Condon, cites unidentified sources, saying, "The agency will leave intact rules that allow money funds to carry a stable $1 share price, said the people, who asked not to be identified because the SEC may revise its plans. While Chairman Mary Schapiro said May 4 that the price rules may need to be altered, the agency instead will seek input on the issue from fund managers and investors, leaving a decision for later."
It continues, "Money funds were concerned that ending the stable $1 share price would ruin their reputation as the safest investments after insured bank accounts and Treasury debt, said Peter Crane, president of Crane Data LLC, an industry research firm in Westborough, Massachusetts. They sought to steer regulatory changes by offering their own recommendations for protecting investors."
Crane told Bloomberg, "Anything short of radical surgery would be great news for money-fund providers." The article adds, "The SEC plans at a June 24 public hearing to propose rules similar to those recommended in March by the Investment Company Institute, the fund industry's Washington-based trade group, the people said. They include increasing the proportion of assets a fund must hold in cash, or in securities that can easily be turned into cash, and reducing the average maturity of a fund's securities. The agency expects to enact new regulations by yearend."
Finally, Bloomberg says, "The SEC probably won't include the variable share price as an official proposal because there has been debate inside the agency, and the industry, about whether it would make sense for all types of money funds, one of the people familiar with the matter said.... After the meeting next week, the SEC will solicit public comments.... The staff then determines whether to make any changes before commissioners hold a second vote to make regulations binding."
