The Securities and Exchange Commission is considering a list of regulations for money market funds that goes far beyond proposed reforms issued in March by the Investment Company Institute.
The SEC, which is expected to issue its proposed rules this month, is considering guidelines that would make clear a fund's responsibility to turn away influxes of cash from institutional investors that may cause large swings in the fund's assets.
The ICI, the mutual fund industrys powerful lobbying group in Washington, in March released a list of proposed reforms for money market funds. The list includes setting minimum levels of liquidity, shortening duration and avoiding lower-rated securities. Beyond those measures, the SEC is considering a rule change that would require funds to disclose regularly the market value of their underlying assets. Currently, money market funds are required to disclose their holdings quarterly, without assigning a market value to those holdings.
The SEC is unlikely to endorse the idea of a so-called floating net asset value, which would untie money market funds from their $1-a-share value, according to a source with knowledge of the commissions deliberations, who asked not to be identified.
Proponents of a floating NAV say that such a structure would make a funds NAV more sensitive to losses and gains in the portfolio, thereby reducing instances of sudden shifts in yield.
The mutual fund industry has opposed the idea moving to a floating net asset value, arguing that investors like money market funds because they stick close to the $1 NAV.