iMoneyNet Analysis of Money Market Fund Reform

The March issue of the publication iMoneyNet ( contains an excellent analysis of the obstacles that omnibus accounts create for money market fund reforms involving redemption restrictions, such as redemption fees and gates, as well as the minimum-balance-at risk proposal.


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The mutual fund industry opposes a floating Net Asset Value (NAV) and other types of structural reforms that will significantly reduce the attractiveness of money market funds as a cash management vehicle.  Recently, several prominent voices within the industry have expressed support for providing funds with the authority to implement certain types of redemption restrictions, such as redemption fees and/or gates, to protect a fund from a "run" in a liquidity crisis. Unfortunately, redemption restrictions cannot be applied uniformly on those shareholders holding money market fund shares in omnibus accounts, where the fund manager has no access to underying shareholder identity and transaction information.


This iMoneyNet article explains the omnibus accounts problem in greater detail and discusses several cost-effective solutions that would permit a fund to implement redemption restrictions fairly and evenly across all shareholder accounts, assuming the SEC decides to move in this direction.


Niels Holch

Coalition of Mutual Fund Investors (