The SEC has adopted the much-debated new rules for institutional prime and municipal money funds.
Key elements include:
- Money funds will carry a net asset value (NAV) to emphasize that the value is not constant as was the prior marketing positioning.
- Money funds can impose liquidity fees and gates (limitations on redemptions) if necessary.
- The funds will carry enhanced diversification, disclosure and stress testing requirements.
- The IRS will release a new simplified treatment to enable investors to track gains and losses and avoid wash sales.
Detractors of these new rules suggest that sophisticated Wall Street investors will avoid the liquidity gates by quickly redeeming capital prompting a “rush for the door” behavior.