SEC won’t change money market fund rules
The Securities and Exchange Commission has declined to impose new regulations on money market mutual funds, which were exposed as vulnerable during the 2008 financial crisis.
Panicked investors withdrew more than $300 million from the funds in one week in September 2008. This cast doubt on the security of the funds, which are not insured.
SEC Chairwoman Mary L. Schapiro had lobbied for new regulations that would require the funds to keep cash reserves to cover large redemptions, and to let their prices fluctuate like other mutual funds. Currently, the money market mutual funds use a $1 share price, redeemable on demand.
But Schapiro said in a statement Wednesday that she was calling off a vote on the proposed regulations after commissioners said they did not support the reforms.
She said that the funds — traditionally seen as low-risk, low-return places to park cash — can be vulnerable to a run of redemptions and that she would continue to support reforms. “Money market funds effectively are operating without a net,” Schapiro said.
“The issue is too important to investors, to our economy and to taxpayers to put our head in the sand and wish it away,” she said. “Money market funds’ susceptibility to runs needs to be addressed.”
