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September 20, 2017

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SEC poised to end US$1 a share for money funds

WASHINGTON -- Regulators are expected to vote Wednesday to end a longtime staple of the investment industry — the fixed US$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 may also vote to let money funds block withdrawals during periods of stress or impose new fees for withdrawals.

The "breaking of the buck" by a large money fund during the 2008 crisis stoked a run on some other funds and forced the government to intervene to restore confidence.

Under the new rules, the share prices of the funds involved will be required to "float," just as with other mutual funds. Big institutional investors could lose principal if the value of the shares falls below US$1. Individual investors likely won't be affected.

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