The Securities and Exchange Commission voted 3-2 on July 23 to approve new regulations governing money market mutual funds. Under the final rule:
- Funds investing in government securities will be allowed to continue to trade at a stable $1.00 net asset value (NAV).
- Other funds offered to retail investors also will be allowed to continue to trade at a stable NAV.
- Prime and tax-exempt municipal funds offered to institutional investors will be required to float their NAVs to four decimal places (e.g., 0.01 cent on a $1.00 share, or 1 cent on a share priced at $100).
- A fund’s board will be granted new powers to impose redemption fees or to halt (“gate”) redemptions if the fund’s liquidity is impaired.
- These new rules will take effect in 2016.
ICI President and CEO Paul Schott Stevens made the following statement today about the new rules for money market funds:
“Through six years of deliberations, the Securities and Exchange Commission has received extensive analysis and comment from the sponsors of money market funds, investors, issuers, and many other parties. The Commission in recent months has proceeded thoughtfully to craft a robust and meaningful final rule that will impose significant structural changes across the industry, particularly on money market funds used by institutional investors.
“While we may question some aspects of the rule as adopted, we strongly believe that the SEC has the long regulatory experience and deep technical expertise required to strike the proper balance, making money market funds more resilient in times of financial stress while preserving the utility and value of these funds for investors.
“We will work with the Commission and with ICI’s members to ensure a smooth transition to these new rules as they are implemented over the next two years.”
Hundreds of groups representing money market fund investors and issuers of short-term securities have raised their concerns about regulatory proposals—especially the floating NAV—to the SEC, other regulators, and members of Congress during several rounds of regulatory review. While those concerns are not fully reflected in the final rule, the engagement of a broad swath of America’s business and municipal communities has helped shape the outcome of this debate.
We at ICI thank you for your support and involvement. ICI and its members will continue to keep you informed as the industry and investors adapt to the new regulations.
Chief Public Communications Officer
Investment Company Institute