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SEC’s New Money Market Fund Rules

Posted by Larry Doyle on January 29th, 2010 10:44 AM |

Sense on Cents once again thanks our friends at 12th Street Capital for providing tremendously useful information and analysis. What do we learn today? The new rules adopted by the SEC for money market funds.

The overview of these rules is provided by Orrick, Herrington and Sutcliffe LLP.  The driving force behind the new SEC rules is an effort to promote greater disclosure and liquidity within money market portfolios. After the crisis of 2008-whenever (it’s not over yet), money market funds were and are much riskier than previously perceived. The risks lay in the fact that these funds invested in a fair amount of risky assets. Now that the government backstop of this industry has ceased, the new rules are needed for the industry to move forward.

Investors need to know that when these rules are effective (sometime  in 2010), funds can ‘break the buck’ ($1.00 NAV, net asset value) and suspend redemptions.  

Navigate accordingly knowing that the money market industry is not what it used to be.

Thanks again to 12th Street and to Orrick for this 2-page overview. Click on image to open pdf document:

LD






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