Implications of "Best Interest" Rule for Annuities
Aaron Levitt
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With broker-dealers and agents now acting in favor of clients, investors may be...
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Subsequently, the U.S. Securities and Exchange Commission (SEC) introduced new rules and regulations to reduce the risks associated with money market funds. The enhanced disclosure requirements for the “shadow price,” or the market-based price of the fund portfolio introduced in January 2011, were a part of this wider money market fund reform.
In this article, we will examine what a shadow price is and the implications of the SEC ruling for investors.
Check out our Money Market Fund section to keep up to date with the mutual fund industry.
A money market fund invests in the highest-rated short-term debt securities, which mature in less than 13 months, such as U.S. Treasury bills and commercial paper. Since the market value of these securities is affected by changes in interest rates, maturity and credit quality, the shadow price of the fund deviates from the $1 per-share value. SEC’s rules and regulations on the quality and maturity of the securities in the fund reduce the interest rate, credit and liquidity risks of the money market funds. This ensures that the shadow price deviates in a very narrow range enabling the fund to maintain a stable NAV of $1 per share.
SEC has mandated the use of floating NAV by institutional prime money market funds. Learn about floating NAV here.
In order to understand how NAV is determined, click here.
The enhanced disclosure requirements for shadow prices allow investors to have more information on a fund’s investments and its shadow price, enabling them to better evaluate the money market funds.
To familiarize yourself with regulations governing the mutual fund industry, read about the Investment Company Act of 1940.
Be sure to follow our Mutual Funds Education section to learn more about mutual funds.
Receive email updates about best performers, news, CE accredited webcasts and more.
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Subsequently, the U.S. Securities and Exchange Commission (SEC) introduced new rules and regulations to reduce the risks associated with money market funds. The enhanced disclosure requirements for the “shadow price,” or the market-based price of the fund portfolio introduced in January 2011, were a part of this wider money market fund reform.
In this article, we will examine what a shadow price is and the implications of the SEC ruling for investors.
Check out our Money Market Fund section to keep up to date with the mutual fund industry.
A money market fund invests in the highest-rated short-term debt securities, which mature in less than 13 months, such as U.S. Treasury bills and commercial paper. Since the market value of these securities is affected by changes in interest rates, maturity and credit quality, the shadow price of the fund deviates from the $1 per-share value. SEC’s rules and regulations on the quality and maturity of the securities in the fund reduce the interest rate, credit and liquidity risks of the money market funds. This ensures that the shadow price deviates in a very narrow range enabling the fund to maintain a stable NAV of $1 per share.
SEC has mandated the use of floating NAV by institutional prime money market funds. Learn about floating NAV here.
In order to understand how NAV is determined, click here.
The enhanced disclosure requirements for shadow prices allow investors to have more information on a fund’s investments and its shadow price, enabling them to better evaluate the money market funds.
To familiarize yourself with regulations governing the mutual fund industry, read about the Investment Company Act of 1940.
Be sure to follow our Mutual Funds Education section to learn more about mutual funds.
Receive email updates about best performers, news, CE accredited webcasts and more.
Aaron Levitt
|
With broker-dealers and agents now acting in favor of clients, investors may be...
Justin Kuepper
|
Let’s take a look at what sets China apart from other emerging markets,...
News
Iuri Struta
|
Check out the latest edition of mutual fund scorecard.
Find out why $30 trillon is invested in mutual funds.
Download our free report
Find out why $30 trillon is invested in mutual funds.
Download our free report
Find out why $30 trillon is invested in mutual funds.
Mutual Fund Education
Justin Kuepper
|
Let's take a closer look at how ESG investments have outperformed during the...
Mutual Fund Education
Daniel Cross
|
While CITs and mutual funds share many similarities, there are some key differences...
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Sam Bourgi
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The phrase ‘bear market’ has been thrown around a lot lately, but it...