SEC adopts reforms to money market funds

By Mark Burgess | July 12, 2023 | Last updated on October 27, 2023
2 min read

The U.S. Securities and Exchange Commission adopted new rules on Wednesday for money market funds, looking to shore up the safe investment vehicles against runs during periods of market stress.

The amendments to the Investment Company Act of 1940 will increase the minimum liquidity requirements for money market funds and remove provisions that allowed the funds to impose so-called “gates” that temporarily suspend redemptions.

Money market funds will be required to hold a greater proportion of their assets in securities that can be liquidated within one to five business days, providing a buffer in the event of rapid redemptions.

The moves come after investor redemptions from some money market funds soared early in the Covid-19 pandemic, putting stress on short-term funding markets that required government intervention. A similar run happened during the 2008 financial crisis.

Money market funds now have nearly US$6 trillion in assets, the regulator said.

SEC chair Gary Gensler said in a statement Wednesday that gates may have encouraged runs in March 2020, and that prohibiting the practice “may remove incentives for preemptive redemptions.”

The rules will also require funds that serve institutional investors (institutional prime and institutional tax-exempt money market funds) to impose liquidity fees when those investors redeem during periods of market stress. Generally speaking, redemption fees will apply when a fund experiences daily net redemptions of more than 5% of net assets.

“Such fees will help ensure that during stress times, redeeming investors rather than remaining investors bear the cost of redemptions,” Gensler said.

The liquidity fees replace the originally proposed “swing pricing,” which the fund industry had opposed.

The changes will take effect 60 days after publication in the federal register with a tiered transition for funds to comply.

In Canada, the Office of the Superintendent of Financial Institutions is reviewing banks’ liquidity adequacy requirements to consider whether new categories of wholesale funding are needed to address the risks from products such as high-interest savings account ETFs.

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Mark Burgess

Mark has been the managing editor of since 2017. He has been covering business and politics for more than a decade. Email him at