Connect to share and comment

SEC has internally released money market fund draft rule: sources

PlacardEnlarge
(Globalpost/GlobalPost)

By Sarah N. Lynch

WASHINGTON (Reuters) - Staff at the Securities and Exchange Commission have circulated a long-awaited draft proposing new reforms for the $2.6 trillion money market fund industry, people familiar with the matter told Reuters.

Details on the exact contents of the roughly 500-page proposal could not be immediately obtained.

SEC staff have generally been considering whether or not to target only prime funds, which are seen as more risky and more likely to experience runs. One such prime fund was the Reserve Primary Fund, which spooked investors industry-wide in 2008 when it "broke the buck" amid fears about its heavy exposure to collapsed investment bank Lehman Brothers.

People familiar with the staff's thinking expect the draft will address in some form or another whether to require only certain target prime funds to float their net asset value, an idea that has previously been suggested by major money fund players such as Charles Schwab in an effort to strike a compromise.

Previously, former SEC head Mary Schapiro had pushed for tougher measures, including capital buffers and redemption holdbacks, or moving from a stable to a floating net asset value on a broader scale.

The lengthy money fund draft arrived in SEC officials' inboxes on Friday afternoon, just hours after new SEC Chair Mary Jo White publicly addressed the fund industry's largest trade association, the Investment Company Institute.

In that speech, White was coy about what the proposal will contain and its timing, saying only it would be balanced and unveiled in the "near future.

The draft rule is tentatively scheduled for a 30-day review period. However, draft rules are often penciled in for a one-month review period and frequently get extended so commissioners can get more time to consider them.

(Reporting by Sarah N. Lynch; Editing by Karey Van Hall and Tim Dobbyn)

http://www.globalpost.com/dispatch/news/thomson-reuters/130511/sec-has-internally-released-money-market-fund-draft-rule-source