Wednesday, June 24, 2009

Federal regulators are proposing tightened rules for money-market mutual funds that will require them to hold a reserve of assets that could be easily sold and to invest only in the highest quality securities.

The Securities and Exchange Commission action comes after a $60 billion money fund "broke the buck," exposing investors to losses that could ultimately reach about 8 cents on the dollar. The value of the Primary Reserve Fund's assets in September fell to 97 cents per investor dollar — below the dollar-for-dollar level needed for full repayment.

The SEC voted to issue the rule changes for the popular money-market funds, which hold about $3.8 trillion in assets, for public comment. The new rules could be approved sometime after that 60-day period.