Last night, Reuters wrote "SEC has internally released money market fund draft rule: sources", which says, "Staff at the Securities and Exchange Commission have circulated a long-awaited draft proposing new reforms for the $2.6 trillion money market fund industry, people familiar with the matter told Reuters. Details on the exact contents of the roughly 500-page proposal could not be immediately obtained." If true and if the proposal is acceptable to a majority of SEC Commissioners, this means we could see a reform proposal in as soon as 30 days.
On Friday, SEC Chair Mary Jo White said at the Investment Company Institute's annual meeting, "As the SEC works to develop and propose meaningful money market fund reform, our goal is to preserve the economic benefits of the product while addressing potential redemption pressures and the susceptibility of these funds to runs -- runs in which retail investors are especially likely to suffer losses. While I'm sure that you would like me to say more about this today, I'll stop there as the staff and Commissioners are actively engaged in discussions designed to yield an appropriate and balanced proposal in the near future."
The Reuters story explains, "People familiar with the staff's thinking expect the draft will address in some form or another whether to require only certain target prime funds to float their net asset value, an idea that has previously been suggested by major money fund players such as Charles Schwab in an effort to strike a compromise. Previously, former SEC head Mary Schapiro had pushed for tougher measures, including capital buffers and redemption holdbacks, or moving from a stable to a floating net asset value on a broader scale."
The piece adds, "The lengthy money fund draft arrived in SEC officials' inboxes on Friday afternoon, just hours after new SEC Chair Mary Jo White publicly addressed the fund industry's largest trade association, the Investment Company Institute."
Friday's Wall Street Journal in wrote, "U.S. securities regulators, under pressure to address risks posed by the $2.6 trillion money-market-mutual fund industry, are considering a scaled-back approach that would tighten rules for about half of the sector that is seen as most vulnerable to investor runs, according to people familiar with staff discussions. The approach, one of several being contemplated at the Securities and Exchange Commission, would require only the riskiest funds to abandon their fixed $1 share price and allow shares to float in value like other mutual funds, these people said."
