Legg Mason is shuttering five of the money market funds that are used by Morgan Stanley Smith Barney as sweep vehicles for its brokerage customers. The funds will be replaced with alternative investment accounts.

Legg Mason and Morgan Stanley Smith Barney entered into a strategic relationship when Legg Mason swapped its brokerage arm for Citi's Smith Barney asset management business in June of 2005 (see MFWire.com, June 24, 2005). Citi subsequently sold its Smith Barney brokerage business to Morgan Stanley in 2009.

The five money market funds will liquidate in stages over the next two years, with the final payout being no later than June 30, 2012. The first share class to liquidate will be the class I shares. That liquidation will take place in August [see SEC filing].

While the funds are in the process of liquidating, each share class will remain available to brokers until it is liquidated. Legg Mason is waiving the CDSC for shareholders that move out of the fund on their own.

The quintet of funds are all part of the Legg Mason Partners Money Market Trust. The funds to be liquidated include the $13.7 million AUM Western Asset Money Market Fund [SBCSX].

Four state and municipal money market funds are also liquidating. Those funds include: Western Asset Municipal Money Market Fund, Western Asset California Municipal Money Market Fund, Western Asset New York Municipal Money Market Fund and Western Asset Massachusetts Municipal Money Market Fund. 

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