SEC May Propose New Money Fund Rules in June, Chairman Says

The Securities and Exchange Commission may propose rules as early as next month to boost the credit quality and shorten the maturity of eligible money-market fund investments, Chairman Mary Schapiro told the Mutual Fund Directors Forum. The SEC may also propose rules that would raise funds' capital requirements to ensure that they have enough cash to meet investor redemptions.

Schapiro said the proposals would go further than those favored by the industry, possibly by recommending floating net-asset values for money market funds to better protect investors from potential abuses and runs on the funds.

The SEC rules would follow a report the Investment Company Institute released in March that proposed a number of reforms to bolster the industry.

In its report, the Investment Company Institute opposed floating net-asset values, though the idea has gained traction among Obama administration advisers, including former Federal Reserve Chairman Paul Volcker, an economic adviser to President Obama.

"Our staff is closely examining the credit quality, maturity and liquidity provisions currently applicable to money market funds to strengthen their requirements and better protect money market fund investors," Schapiro said.

The SEC may also consider changes to Rule 12b-1, which allows fund advisors to use mutual fund assets to pay for fund marketing and distribution costs.

While Schapiro said that while 12b-1 fees "deserve and will receive" attention, the SEC probably won't have the time to review them until later in the year.

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