An article in today's Financial Times, "Fund Managers on Alert Over Money Market Shake-Up," says, "Fund managers are jostling to keep hold of $900bn of assets that could be shaken loose by new US rules on money markets funds due to be unveiled this week. Firms are planning new products, systems and marketing efforts to stop the money being moved to bank accounts, while at least one, Federated Investors, is considering suing the Securities and Exchange Commission to halt the regulations." (See Crane Data's July 18 news story, "Federated Letter (Again) Urges SEC Not to Impose Onerous Regulations.") The FT article continues, "Under the SEC proposal, to be published on Wednesday, certain funds would have to switch to a floating share price instead of the current fixed $1 a share cost. That will make them less like bank accounts, because investors will see their balance fluctuate. The rule is expected to be applied to funds holding about $900bn of the industry’s $2.6tn in assets, and could prompt customers to consider moving money to banks, industry executives say, or keeping it in unaffected money market funds, separate accounts, or alternative higher-yielding fixed income funds." The article adds, "In legal letters to the SEC, Federated has warned that the regulator will be acting outside its authority by imposing a floating share price. The company's chief executive, Christopher Donahue, said in 2012 that it would sue the SEC if it went ahead with the proposal." It goes on, "The company will make a decision based on what are expected to be hundreds of pages of detailed rulemaking published on Wednesday. A Federated spokesman refused to comment on a potential challenge, but said: 'We hope that good policy prevails.'" The FT piece adds, "Other big money market fund providers include Fidelity and Vanguard. They are hoping for a two-year window to upgrade systems to cope with the new rules and to educate customers about choices available. Many have launched or filed for approval for new funds, such as ultra-short duration bond funds, exchange traded funds or other cash-like products. The US Chamber of Commerce launched a last ditch bid to delay the ruling on Monday, saying it needed time to comment on proposed tax changes -- aimed at making the transition to a floating share price easier -- which are also imminent."
