The following is an Associated Press news release quoted from the Washington Post. (It is the second article down on the page.)
New SEC rules for money-market funds"Regulators voted by a narrow margin to end a longtime staple of the investment industry — the fixed $1 share price for money-market mutual funds — at least for some money funds used by big investors.
The idea is to minimize the risk of a mass withdrawal from the funds during a financial panic.
The Securities and Exchange Commission also is letting all money funds block withdrawals when their assets fall below certain levels or impose fees for withdrawals.
The rules were adopted Wednesday by a 3-to-2 vote, culminating several years of regulatory haggling and false starts. They were opposed by one Democratic and one Republican commissioner.
The floating-price requirement applies only to prime institutional funds, which are considered riskier. They represent about a third of money-market funds, according to the SEC.
A run on a money-market fund during the financial crisis showed how risky the funds could be. The Lehman Brothers collapse in fall 2008 triggered the failure of the Reserve Primary Fund, one of the biggest money-market funds, which held Lehman debt. The Reserve Primary Fund lost so much money that it “broke the buck,” as its value fell to 97 cents a share."
— Associated Press
Comments
Also, should they still call them money markets? Doesn't that just confuse Joe MainStreet? Isn't this a new investment vehicle distinct from non-prime institutional money markets which also are called money markets and remain the same as people are accustomed to? The psychology of the "investment" is entirely changed when people can't continue the savings account type analogies with language of principle plus permanent interest ownership.