SEC Votes to Propose Big Changes to Money Market Funds
In its open meeting yesterday, the SEC voted to propose sweeping regulatory changes for money market funds and to consider several other fundamental changes. The SEC’s proposed amendments would require minimum levels of liquid assets to pay redemptions, shortened weighted average maturities, eliminating higher-risk securities, periodic stress testing, and monthly holdings reports. The SEC also said it would consider eliminating the fixed $1.00 NAV regime and satisfying redemption requests “in-kind” if over a certain size.
OUR TAKE: The SEC needs to be careful not to make money market funds an expensive low-yielding product, which could be the result if these suggested proposals are adopted. Investors may become more interested in competitive products such as bank CDs.