In the midst of a leadership change, the SEC is working on proposed new rules to reduce risk in money market funds. The proposal is set to be released in the next two months. SEC staff is working through the technical details of the proposal, which failed to move forward last year under SEC chairman Mary Schapiro.
The rule is intended to reduce the likelihood that investors pull their money from funds in a crisis, which could harm the broader credit markets. One option under consideration is for money funds to adopt a floating share price, with the goal of making investors less sensitive to small variations in the $1 share price. However, the money-fund industry has said that a floating-share price would ruin the funds’ appeal.
The money-fund proposal was originally slated to be released in March, but technical details have held up the process. It is now expected to be ready by June.
