SEC May Eliminate Money Funds’ $1 NAV

The Securities and Exchange Commission is considering requiring money market funds to set aside 1% to 3% of their assets and lifting the $1 net asset value, sources with knowledge of the discussions told Bloomberg News. The SEC may require any fund that did not set aside the capital buffer to revert to a floating NAV within 60 days.

Many of these ideas, submitted to the SEC in January, are from university economists who call themselves the Squam Lake Group.

“Some variant of the Squam Lake proposal would be a significant improvement that would reduce the risk that money market funds pose systemic problems in the future,” Eric Rosengren, president of the Federal Reserve Bank of Boston, told Bloomberg.

The $2.64 trillion money fund industry has resisted a floating NAV, saying that it would result in a loss of assets.