Fund rule proposals

March 18, 2009|By Bloomberg News

Mutual-fund executives have proposed rule changes to make money-market funds safer while heading off tougher regulations proposed by advisers to the Obama administration.

The proposals include plans to introduce liquidity requirements, shorten maturity limits and require more disclosure of fund holdings, according to the summary of a report to be released today by Investment Company Institute. The board of the Washington-based trade association approved the plan yesterday.

A committee headed by Vanguard Group Chairman John J. Brennan had studied money funds for more than a year, when the $62.5 billion Reserve Primary Fund collapsed in September, setting off an industrywide run by investors.

"From the client's standpoint, we're talking about improving the liquidity and quality of the funds," Mark R. Fetting, chief executive officer of Baltimore-based Legg Mason Inc. and a member of the advisory panel, said in an interview yesterday.

Fetting said the industry executives hoped the report would pre-empt regulations backed by Paul A. Volcker, the former Federal Reserve chairman who leads President Barack Obama's Economic Recovery Advisory Board.

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