US securities regulators have decided to adopt rules aimed at making money market funds a safer investment after the collapse of the Reserve Primary Fund triggered a run on the $3.24 trillion (£2 trillion) market in 2008.
The Securities and Exchange Commission yesterday voted to bolster the funds’ liquidity, limit their riskier investments and to show investors that the funds may not always maintain a stable $1 share value. Money market funds were considered as safe as cash until the collapse of Lehman Brothers pushed the value of the Reserve Fund money market fund below $1 a share and wreaked havoc on the industry.
Under the new rules, net asset value – or value of each share of a money fund – would be disclosed on a 60-day lag basis and allow investors to follow a fund’s share price, and see which funds are taking risks.
City A.M. Reporter