The Securities and Exchange Commission will be issuing a final money market mutual fund rule “in the very near term,” SEC Chairman Mary Jo White said Monday in prepared remarks to a Securities Regulation Institute symposium in California
She said a rule is needed to reduce the risk of a run on money market funds that could imperil the stability of these popular investments, such as what happened during the financial crisis after Lehman Brothers filed for bankruptcy and the Reserve Primary fund “broke the buck,” or dipped below the net asset value of $1 a share typically maintained by money market funds, after it wrote off the Lehman debt it held. Subsequently, investors yanked more than $200 billion from prime money-market funds during the next two days.
Last June, the agency offered two possible approaches to enhanced money fund control. Chairman White said either could be enacted alone or they could be put in place in tandem.
One is a floating price called net asset value for prime institutional money market funds––the type of fund that experienced problems during the financial crisis. The other proposal would require money market funds under certain circumstances to impose a liquidity fee and permit the imposition of redemption gates.
White also told the gathering the agency will likely complete its investigations this year regarding fraud stemming from the meltdown.