The Securities and Exchange Commission (SEC) unanimously voted June 24, 2009, to propose significant rule amendments to enhance the current regulatory framework for money market funds. The amendments were proposed to increase the resiliency of money market funds to market stresses and to reduce the risks of runs on the funds (such as when the Reserve Primary Fund “broke the buck” last year). The SEC is also seeking comment on a number of questions regarding more fundamental changes to the regulation of money market funds, including whether a floating net asset value (NAV) might better protect investors and funds than the current stable NAV framework, as well as the role of credit rating agencies. Many of these proposals were offered as recommendations in the “Report of the Money Market Working Group” published by the Investment Company Institute, and more recently by the Obama Administration in its White Paper on Financial Regulatory Reform.
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