Republican Commissioner Daniel M. Gallagher said in a Jan. 16 speech that SEC staff were preparing a rule-making proposal he expected to see before the end of March.
“Forcing money-market funds to float their net asset value has long been on the SEC’s menu of options for structural changes,” Mike McNamee, a spokesman for the Investment Company Institute, the fund industry’s Washington-based lobby group, said in an e-mailed statement. “We continue to believe that temporary ‘gates’ to halt redemptions from prime money-market funds during times of market stress, with the option to impose fees for investors seeking further redemptions, would better address regulators’ concerns about redemption pressures.”
A floating share price may also create new accounting challenges for investors, although they could be directly addressed by the SEC, one of the people said. The agency has the authority to set accounting standards.
The commission staff is grappling with concerns that a money fund with a floating share value might not be considered a cash equivalent, the person said. That could make them less attractive to institutional investors and businesses that need to hold a certain percentage of assets in cash. The SEC could propose to clarify the cash status of money funds as part of a new rule proposal, the person said.
Mary Jo White, President Barack Obama’s pick to chair the SEC, is set to appear at a nominations hearing March 12 before the Senate Banking Committee.