You are probably not aware of it, but On October 14, 2016 new SEC rules will go into effect. Because of regulatory changes made by the Securities and Exchange Commission, money market mutual funds will be required to more accurately report prices per share of these money market funds. When these funds were introduced the idea was to give people a place to park some money that would get better rates of return than simple bank CDs. The pledge of these funds was that the share price would never go below $1. Subsequently, they have always been reported at a dollar per share. They will now be allowed (regulated) to float. This means if the share price reduced to .90 cents per share your $100,000 would now be worth $90,000. This sounds like good news and in fact is a ruling that will “protect” the poor uninformed consumer. But many are saying this ruling is in fact causing the taxpayer safety net to get smaller.
That isn’t the bad news. Would you believe these new SEC rules encourage more fees and less access to your money by creating redemption limits during times of stress? These limits are often called “gates” because they would temporarily lock investors into a fund even when they wish or need to sell. Who gets to determine the “times of stress?” The fund managers have that decision authority. Did you just further lose control of YOUR money?
These impending gates and fees are driving sharp rate increases while providing only uncertainty for the credit markets. That has already made investment costs for these money market funds to increase. Short term borrowing costs for cities, counties and foreign governments have almost doubled. Over 400billion has already moved out of these funds in anticipation of October 14th.
Can you imagine the stress on anyone who has their money in a money market mutual fund who realizes they may not be able to access that money during times of stress? Are you willing to be subject these new SEC rules and the stress you will have with less control with your own money?
There is still a trillion dollars in those funds.
Thank you SEC for doing something that helps our business! Life insurance and annuities are amazing places for your money in this low interest rate environment.
Financial Freedom and CONTROL.