As reported by ANDREW ACKERMAN And KIRSTEN GRIND from the wall street journal , regulators are completing a controversial proposal to shore up the $2.7 trillion money-market fund industry, more than three years after the collapse of Lehman Brothers Holdings Inc. sparked a panic that threatened the savings of millions of investors and forced the federal government to intervene.
The Securities and Exchange Commission in the coming weeks will unveil a two-part plan to stabilize money funds, which invest in short-term debt instruments and are designed to be safe and readily accessible to investors, according to people familiar with the matter. At least three of five SEC commissioners would need to approve the proposals to submit them for public comment.
The SEC’s aim is to minimize any losses for shareholders in the event of another financial panic. Investors for months have fretted over how a Greek government-bond default might affect U.S. money-market funds. In recent months, these funds have moved to reduce their exposure to European banks, especially French ones, amid fears over their financial health.
But fund-industry executives say the rules could damp returns for millions of investors, prevent them from getting all their money out during a crisis and reduce confidence instead of bolstering it.
Money-market funds are an important source of credit for companies and tighter rules on their capital and liquidity might affect the funds’ ability to lend to corporations, critics warn.