The Securities and Exchange Commission (SEC) just adopted new rules to their oversight of money market funds — revisions that include increasing credit quality, improving liquidity, shortening maturity limits, and requiring the disclosure of a fund’s actual “mark-to-market” net asset value, known as a “shadow NAV,” on a delayed basis.
This SEC action grows out of the financial crisis of 2008 and the weaknesses revealed by the “breaking of the buck” of the Reserve Primary Fund in September 2008. Those events precipitated a full-scale review of the money market fund regulatory regime by the SEC.
According to a recent SEC press release:
Washington, D.C., Jan. 27, 2010 – The Securities and Exchange Commission today adopted new rules designed to significantly strengthen the regulatory requirements governing money market funds and better protect investors.
“These new rules will have substantial benefits for investors and are an important first step in our efforts to strengthen the money market regime,” said SEC Chairman Mary L. Schapiro. “These rules will help reduce risks associated with money market funds, so that investor assets are better protected and money market funds can better withstand market crises. The rules also will create a substantial new disclosure regime so that everyone from investors to the SEC itself can better monitor a money market fund’s investments and risk characteristics.”
Although the SEC says that the new rules will have substantial benefits for investors, there are many significant questions and concerns from the individual investors who use money-market funds to store their emergency funds and as brokerage account sweeps, for ease of use and liquidity.
There is also concern about how these new rules will affect already low yields and whether or not, with lower yields, it would be wiser to keep those funds in an FDIC-insured bank or credit union savings account.
See what the wise individual investors in the Bogleheads Investment Forum have to say about these recent, and any possible future, SEC rule changes. It’s all good food for thought.
These new rules are effective 60-days after their publication in the Federal Register. Mandatory compliance with some of the rules will be phased in during the year. The final rules, including compliance dates, will be posted on the SEC website as soon as possible.
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