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Thursday, June 6, 2013

SEC Proposes Floating NAV, Fees, Restrictions for MMFs

The SEC voted to issue a proposal to increase the regulation of money market mutual funds (MMMFs). The 5-0 vote called for adopting either or a combination of two alternative approaches.

The first alternative would require institutional prime MMFs to have a floating net asset value, instead of the current practice of fixing the NAV at $1 per share. Retail MMFs, defined as those with $1 million-per-day redemption limits, would be exempt.

The second alternative would allow MMFs to continue using a stable NAV but would require the fund to impose a 2% liquidity fee on redemptions when the weekly liquid asset level falls below 15% of total assets. It would also allow funds to stop redemptions for up to 30 days in order to boost liquidity.

The SEC will accept comments on the proposal for 90 days from its publication in the Federal Register.

Read a fact sheet on the proposal.

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