Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, February 23, 2010

SEC Publishes New Rules on Money Market Funds

The SEC posted on its website amendments to rules that govern money market funds and that will tighten the risk-limiting conditions of rule 2a-7 of the Investment Company Act by, among other things, requiring funds to maintain a portion of their portfolios in instruments that can be readily converted to cash, reducing the maximum weighted average maturity of portfolio holdings, and improving the quality of portfolio securities.  In addition, the rules require money market funds to report their portfolio holdings monthly to the Commission and permit a money market fund that has “broken the buck” (i.e., re-priced its securities below $1.00 per share), or is at imminent risk of breaking the buck, to suspend redemptions to allow for the orderly liquidation of fund assets. The amendments are designed to make money market funds more resilient to certain short-term market risks, and to provide greater protections for investors in a money market fund that is unable to maintain a stable net asset value per share.

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