Money-market funds are getting their biggest rules overhaul in years after Wall Street’s top regulator finalized a plan to stem rapid outflows during times of financial stress, Bloomberg News reported. The U.S. Securities and Exchange Commission decided Wednesday to require fees that could significantly affect a key corner of the $5.5 trillion industry. Although the regulations will make it more expensive to yank money during tumult, the regulator backed off a “swing pricing” proposal that the industry opposed. The new rules are meant to discourage runs like the one in March 2020 and shield remaining shareholders from costs tied to the high level of redemptions. After the pandemic’s onset roiled markets, the Federal Reserve was forced to step in to rescue money-market funds for the second time in 12 years, leading to calls for the SEC to impose tougher regulations. Under the regulations approved by three of the commission’s five members, some funds will face mandatory liquidity fees. Those will kick in after a one-year implementation period for institutional prime and institutional tax-exempt funds when daily redemptions surpass 5% of net assets.
