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SEC May Seek Buffers for Funds

Money funds may have to build capital buffers equal to 1% to 3% of assets.

By Christopher Condon, Bloomberg, Robert Schmidt, Bloomberg | Updated on July 28, 2011

Money-market mutual funds would be forced to create capital buffers equaling 1 percent to 3 percent of assets to protect against losses under a plan now favored by the U.S. Securities and Exchange Commission, according to three people briefed on the regulator’s deliberations.

Top SEC officials, seeking to make money funds safer, prefer the plan over another capital buffer idea crafted by Fidelity Investments and calls to eliminate the funds’ stable share price, said the people, who asked not to be identified because they weren’t authorized to speak publicly. The concept is based on recommendations submitted to the agency in January by university economists known as the Squam Lake Group.

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