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Prime Funds to be Targeted in Money Fund Proposal

According to news reports, the SEC’s money market fund reform proposal may only require prime funds to float their NAV.  Prime funds, which invest in short-term corporate debt, are considered the riskiest money market funds and account for about 54% of the industry.  This approach has support from the 12 regional Federal Reserve presidents and would likely be more palatable to the industry than other proposals that have been considered such as requiring capital reserves or requiring all funds to float their NAV.

New SEC Chairman Mary Jo White has failed to provide any details on money market fund reform in recent public remarks.  At an industry conference last week she stated that the goal of the SEC “is to preserve the economic benefits of [money funds] while addressing potential redemption pressures and the susceptibility of these funds to runs.”  With respect to the status of a rule proposal, she added that “the staff and Commissioners are actively engaged in discussions designed to yield an appropriate and balanced proposal in the near future.”