MFDF - Mutual Fund Directors Forum - Researchers at NY Fed Support Holdback Provision for Money Funds test

Member Login

Request an account

Sample Banner 1

Researchers at NY Fed Support Holdback Provision for Money Funds

Researchers at the Federal Reserve of New York have spoken out in support of a money market fund reform proposal that would require a small fraction of every investor’s balance to be subject to delayed withdrawal at all times (called a “minimum balance at risk” or MBR).  Under the plan, a portion of a redeeming investor’s MBR would also be subordinated to nonredeeming investors’ shares. Subordination, which would only affect the allocation of losses in the event that a fund “breaks the buck” and is liquidated, is meant to ensure that if a money market fund does suffer losses, redeeming investors absorb them before nonredeemers do.

The idea was initially outlined in a Fed staff report published in June 2012.  The officials argue that the plan would incentivize investors to evaluate a fund’s riskiness before making an investment. They also argued it would give investors a reason to stay in the fund and “retail investors, who traditionally have been less quick to run from distressed funds, would enjoy greater protections if they don’t run.”

  • All
  • Accounting and Audit
  • Advisory Contracts
  • Board Governance
  • Board Governance: Board Leadership
  • Board Governance: Compensation
  • Board Governance: Oversight of CCO
  • Board Governance: D&O Insurance
  • Board Governance: Self-Evaluation
  • Closed-end Funds
  • ETFs
  • Other Oversight
  • Other Oversight: Alternative Investments and Derivatives
  • Other Oversight: Custody
  • Other Oversight: Fixed Income funds
  • Other Oversight: Distribution
  • Other Oversight: Portfolio Trading
  • Other Oversight: Proxy Voting
  • Other Oversight: Securities Lending
  • Legislative News
  • Money Market Funds
  • Reference
  • Regulatory News
  • Risk
  • Shareholder Disclosure
  • Valuation
  • Webinars
  • Aaron New Tag