U.S. regulators are expected to adopt rules today that force “prime” money market funds used by large institutions to float their share price.

    Proponents have suggested that moving from the current stable US$1 per share net asset value (NAV) to a floating NAV would help prevent investors from getting spooked by the prospect of funds “breaking the buck,” or falling lower than that amount.

    The Securities and Exchange Commission is also likely to finalize a second provision that will permit fund boards to lower so-called redemption “gates” or charge fees in stressed market conditions, according to people familiar with the matter.

    The reform will impact a wide variety of asset managers, from Blackrock Inc., Fidelity and Vanguard to Charles Schwab Corp., Pimco and Federated Investors Inc.

    The two-pronged reform for the US$2.6 trillion industry comes after a long battle between the SEC, the industry and federal banking regulators.

    The industry and the U.S. Chamber of Commerce have warned that any rules that drastically change the structure of money market funds could cut off a major supply of short-term funding for corporations.

    The final rule is expected to carve out exemptions for a wide swath of money funds.

    Funds used by retail investors, for instance, will still be permitted to maintain a stable US$1 per share net asset value because they are considered less likely than institutional investors to run on a fund if the market deteriorates.

    The U.S. Treasury Department, which has been working to devise a way to relieve investors in funds with a floating NAV from burdensome tax rules, is also expected to unveil its plan sometime today, several people familiar with the matter said.

    (SD-Agencies)