The SEC today proposed banning money-market mutual funds from buying illiquid securities and requiring them to have minimum percentages of assets in cash to pay investor redemptions.
The agency also proposed limiting money-market fund investments to only the highest quality securities and requiring them to report their portfolio holdings monthly. In addition, the SEC would allow the suspension of redemptions if a fund breaks the buck, where its net asset value falls below $1 per share, to allow for the orderly liquidation of fund assets, according to statement on the SECs website.
Institutional money-market funds would be required to have at least 10% of assets in cash or U.S. Treasury securities, or readily convertible into cash within one day and at least 30% within a week. Retail money-market funds would be required to have at least 5% of assets liquid within one day and at least 15% within a week.
These proposals are designed to increase the ability of money-market funds to weather future economic storms, SEC Chairwoman Mary Schapiro said on the SEC website.
The agency will seek public comment on the proposal for 60 days after it has been published in the Federal Register.