SEC eyes tighter rules for money market funds

City A.M. Reporter
A PORTION of the $2.6 trillion money market fund industry would be required to fundamentally change how it prices its shares under proposals issued by US regulators yesterday to reduce the risk of abrupt withdrawals.

But the Securities and Exchange Commission plan was not as strict as some market players feared and included an industry-favored provision for funds to charge withdrawal fees and delay return of funds to customers during times of financial distress.

The additional reforms proposed yesterday did not go as far as a draft proposal floated last year by then-SEC chair Mary Schapiro, who left in December.

The fund industry had warned that further major reforms could kill investor interest in money market funds.

In a compromise move, the SEC’s new plan mostly focuses on prime funds for institutional investors, which are seen as more prone to runs because those investors are more sophisticated and more likely to pull large blocks of money first in a panic.