24 April 2024

Prime Money Funds to Float $1 Share Price Under SEC Plan

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The riskiest money-market mutual funds will have to let their share prices fluctuate and charge investors withdrawal fees during times of stress under tougher U.S. rules set for adoption this month.

The Securities and Exchange Commission is poised to impose both requirements on some money-market mutual funds, which required a federal rescue during the 2008 financial crisis, according to a person familiar with the matter who asked to not be named because terms of the final rule haven’t been made public.

Key parts of the proposal have been strongly opposed by the funds’ trade group, the Investment Company Institute, and fund-management company Federated Investors Inc. (FII) which said that a floating share price would destroy demand for prime institutional funds, which invest in short-term corporate debt.

The proposal, which was issued last year, is likely to be voted on by the five-member commission on July 23, the person said.

The plan would require prime institutional funds to float the value of their share price, traditionally set at a stable $1, which makes them a popular place to park cash. It also would require funds to impose a one-percent fee on redemptions and permit them to temporarily suspend withdrawals when liquidity drops well below required levels.

Click here for the full article in Bloomberg.

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