Get ready for new money-fund rules

TDC Note – We have been warning people since the day we launched this website that the criminal banking class is going to steal your wealth that is associated with any banking entity–401K, IRA, CD’s, checking accounts, saving accounts, whatever. The signs are all there, the warning shots are being fired time and again. from Market Watch Money-market mutual funds used to be boring: a little-thought-about place to park your cash. But new rules recently passed by the Securities and Exchange Commission governing the $2.7 trillion industry have sparked proposed changes at two of the largest money-fund providers, Fidelity Investments and Federated Investors Inc. And more changes are likely before the rules take effect in October 2016. As a result, investors used to ignoring that part of their portfolio might suddenly have to pay attention instead, say financial advisers and analysts. The SEC regulations aim to prevent an investor exodus from money-market funds like the one that happened during the 2008 financial crisis, when the federal government had to step in with financial backing for the industry. One requirement under the new rules is that the shares of money-market funds that cater to institutional investors and invest in corporate or municipal debt must float in value, like the shares of most other mutual funds. That’s a change from the stable $1-a-share value traditionally maintained by all money-market funds. The idea is that investors will be aware of changes in asset values as they occur and be able to adjust their holdings accordingly, rather than stampeding out of funds when they suddenly become aware that their shares aren’t worth $1. Another big change is that all money-market funds that invest in corporate or municipal debt will be allowed to charge investors a fee to redeem shares when the funds are under pressure or temporarily block investors from withdrawing cash. These rule changes won’t apply to funds that invest only in the debt of the federal government and agencies like Fannie Mae FNM, -0.63% and Freddie Mac FMCC, -0.38% In reaction to the new regulations, Fidelity said in February that it plans to convert its largest money-market fund, the $111 billion Fidelity Cash Reserves fund, from a “prime” fund — one that invests in both government and highly rated corporate debt — to one that invests only in U.S. government and agency debt. Some other Fidelity prime money-market funds are slated for the same conversion. Federated, meanwhile, said some of its funds will begin investing only in debt that matures in 60 days or less, to make it easier to maintain a stable net asset value of $1 a share. Here’s what investors need to know as changes in money-market funds continue to unfold. 1. Understand types of funds Money funds can be divided into three categories according to their investments: prime funds; “government” funds, which invest in U.S. government and federal agency debt; and municipal funds, which invest in the debt of state and local governments. The new rules will create another distinction: Many money funds now mingle the investments of institutional and individual, or retail, investors. But because the new rules make a distinction between institutional and retail investors, fund companies are working toward separate institutional and retail funds. Retail funds will be open only to individual investors and accounts where end users are individuals, but institutional funds will be open to both institutional investors and individuals. Continue Reading>>>

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