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SEC poised to end $1 a share for some money funds

WASHINGTON — Regulators are expected to vote today to end a longtime staple of the investment industry — the fixed $1 share price for money-market mutual funds — at least for some money funds used by big investors.

The idea is to minimize the risk of a mass withdrawal from the funds during a financial panic. The Securities and Exchange Commission may also vote to let money funds block withdrawals during periods of stress or impose new fees for withdrawals.

The “breaking of the buck” by a large money fund during the 2008 crisis stoked a run on some other funds and forced the government to intervene.

Under the new rules, the share prices of the funds involved will be required to “float,” just as with other mutual funds. Big institutional investors could lose principal if the value of the shares falls below $1. Individual investors likely won’t be affected.

The idea behind adopting floating prices for a portion of the $2.6 trillion money-market fund industry is to stress that while the funds are safer than stocks and many other investments, they still carry risk. Regulators say greater awareness of the risk would reduce the potential for crippling runs on money funds because investors would have acclimated themselves to fluctuating prices.

The Financial Stability Oversight Council has identified money-market funds as a potential risk.

A run on a money-market fund during the financial crisis showed how risky the funds could be. The Lehman Brothers collapse in the fall of 2008 triggered the failure of the Reserve Primary Fund, one of the biggest money-market funds, which held Lehman debt.

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