By Rachelle Younglai
WASHINGTON, Jan 27 (Reuters) – U.S. securities regulators adopted rules aimed at making money market funds a safer investment after the collapse of the Reserve Primary Fund triggered a run on the $3.24 trillion market in 2008.
The Securities and Exchange Commission voted 4-1 on Wednesday to bolster the funds’ liquidity, limit their riskier investments and to show investors the funds may not always maintain a stable $1 share value.
The fund industry was pleased the new rules were less restrictive than the agency initially proposed last year, but the new rules were likely to come at the expense of some yield.
Money market funds were considered as safe as cash until the collapse of Lehman Brothers pushed the value of the Reserve Fund money market fund below $1 a share and forced the federal government to create a program to backstop the market.
“One of the key lessons of the financial crisis is the need for strong liquidity buffers in money market funds,” said SEC Chairman Mary Schapiro, adding the new liquidity rules would help ensure investors are able to get their money out of a fund.