SEC Adopts Amendments to Money Market Fund Rules to Enhance Liquidity and Reduce Risk of Redemptions

The Securities and Exchange Commission (SEC) today adopted amendments to various rules governing money market funds, which are investment products totaling almost 6 trillion dollars in size. The changes are designed to increase liquidity requirements for money market funds and decrease the risk of investor runs during times of market stress. These changes include requiring institutional prime and institutional tax-exempt money market funds to impose liquidity fees when daily net redemptions exceed 5% of net assets unless they can do so at de minimis costs, and also allowing any non-government money market fund to impose a discretionary liquidity fee if the board determines that doing so is in the best interest of the fund. In addition, the SEC has amended certain reporting forms applicable to money market funds and large private liquidity funds advisers. The rule amendments will become effective 60 days after being published by the Federal Register with a tiered transition period for funds to comply, and the reporting form amendments will be effective June 11th 2024.