BlackRock, Fidelity Back SEC Solution to Money-Fund Debate

(Bloomberg) -- BlackRock Inc., Fidelity Investments and Vanguard Group Inc., three of the five largest money-market fund providers, expressed support for the new rules adopted today by the U.S. Securities and Exchange Commission to end years of debateon how to make the $2.6 trillion industry safer.

The changes, to be put into effect in two years, will force funds that cater to institutional investors and buy corporate debt to abandon their traditional $1 share price. They will also give fund boards the ability to impose redemption restrictions and fees during times of crisis.

“Our initial reaction is that the SEC has struck a reasonable balance,” Nancy Prior, head of fixed-income investing at Boston-based Fidelity, said in a telephone interview. The firm managed $405 billion in money funds as of June 30, according to research firm Crane Data LLC.

After years of fighting tighter regulation of money funds, many of the industry’s biggest players have concluded they can accept the new rules and are eager to put the divisive debate behind them. Federated Investors Inc., manager of $202 billion in money funds, stood out for its continued criticism of the rules.

The SEC acted without “any evidence that instituting a floating net-asset value would do anything to eliminate runs,” Federated said in a statement posted on its website. A floating share price would also impose “significantly and costly daily operational burdens on money-fund users, limiting the utility of such funds as a cash management tool,” the company said.

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