SEC Chairman Chris Cox
focused in part on mutual funds as he addressed the current issues facing the financial and mortgage markets on Thursday morning. During his testimony to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Cox shared that the SEC staff has been working with money market fund managers over how to handle downgrades of their holdings.
He also raised the topic of the possibility of money funds breaking the buck, although he noted that only one fund "of very modest size" has done so since the funds originated in the 1970s.
"The Commission is closely monitoring the fund industry and while we have seen some instances of funds requiring infusions of capital from the corporate parents of fund advisers, we are not aware of any money market fund that is threatened with having to reprice below $1.00," Cox added.
Chairman Cox's complete testimony covering mutual funds
Another aspect of our oversight is the mutual fund industry. Here, too, the Commission staff has been active in working with the managers of money market funds as they cope with the downgrading of ratings and the declines in value of securities in which their funds have invested. Commission rules limit money market funds to investing in high-quality, short-term investments in an effort to ensure that these bedrocks of the financial system are reliable in all market conditions. Losses by a money market fund would be reflected by the fund re-pricing its securities below $1.00 (known as “breaking the buck”). Only one fund, and that of very modest size, has ever broken the buck since the development of money market funds in the 1970s. The Commission is closely monitoring the fund industry and while we have seen some instances of funds requiring infusions of capital from the corporate parents of fund advisers, we are not aware of any money market fund that is threatened with having to reprice below $1.00.
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