Saturday, August 2, 2014

Money Market Mutual Fund Developments

If you have a money market account, you need to be aware of the latest SEC regulatory changes regarding those money market accounts. Changes will be implemented over a number of years, but individuals, trusts, and small businesses should review their options and the category into which they fall.

For many years, money market mutual funds provided a safe, stable haven for idle funds. In fact, the funds were so stable that many equated money market mutual funds with bank checking accounts. With the 2008 financial crisis in the US, the SEC decided to strengthen money market regulations in order to provide more stability to the market.

For individuals and what the SEC deems "natural persons":
First, U.S. Government issued or guaranteed money market mutual funds will undergo no changes. They will continue to offer $1 net asset value per share stability, and they will not impose any restriction on investor access.

Second, U.S. Government issued or guaranteed money market funds that also include corporate bonds in their fund will continue to offer $1 net asset value per share stability, but they will have the ability to impose restrictions on redemptions in times of what the SEC calls "market stress."

Third, municipal bond money market funds will also continue to offer $1 net asset value per share stability, but they too will have the ability to impose restrictions on redemptions in times of market stress.

For corporations, small businesses, and pension plans:
Funds that are considered "institutional" and cater to other than "natural persons" will be required to transact buys and sells at a floating rate (read "not held at a stable $1 per share) that will be carried out to the 4th decimal place. Also, liquidity fees may be imposed upon redemptions during times of market stress.

The time period for this implementation date is currently scheduled at 2 years. Blue Haven Capital recommends you speak with your advisor and ask specifically what sort of restrictions and changes will be imposed by the money market account you currently hold. Also, there are alternatives you can consider and those should be offered to you as well.

As always, we recommend you have an advisor who acts as a fiduciary at ALL times. That way you know the advisor is legally obligated to put your interest first at ALL times, not just some times.

See this SEC site for more information, or contact us if we may be of further assistance.



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