“These rules will take important initial steps toward making money-market funds less vulnerable to runs,” SEC Chairman Mary
Schapiro said at a meeting in Washington. “The new rules will have substantial benefits for investors.”

Money Market Funds: No Longer Safe

Excerpts :

“These rules will take important initial steps toward making money-market funds less vulnerable to runs,” SEC Chairman Mary
Schapiro said at a meeting in Washington. “The new rules will have substantial benefits for investors.”

[...]

Suspension of Redemptions: The new rules permit a money market fund’s board of directors to suspend redemptions
if the fund is about to break the buck and decides to liquidate the fund (currently the board must request an order
from the SEC to suspend redemptions). In the event of a threatened run on the fund, this allows for an orderly liquidation
of the portfolio. The fund is now required to notify the Commission prior to relying on this rule.

Formerly the fund had to seek permission to suspend redemptions.

Not any more.  Now the fund’s board is empowered to do so unilaterally and advise the SEC, as opposed to asking the SEC for
permission to toss up the gates.

This is not a small difference folks.  Indeed, it is a major problem.  You could easily find your so-called “safe” money market fund
gated and you unable to get to your money until the fund liquidates - without warning.

So yeah, [of course] the funds are now “less vulnerable to runs” [because] if there’s a problem they can immediately bar the
door and keep you from leaving with your cash!

[...]

Investors no longer can reasonably rely on daily liquidity for these funds as a consequence of this change.  While under normal
conditions daily liquidity remains available it is precisely under abnormal conditions that an investor is likely to most need access
to this money instantly, for example to meet a margin call or for other emergency funding requirements.

The inversion of the former rules in this regard means you can no longer treat these as cash equivalents with a higher yield.
Indeed, there is damn little reason for anyone to buy these at all now - you’re really not any better (or worse) off if you simply
deposit the money in Treasury Direct and then buy a ladder of short-term bills - say, 4 or 13-week instruments.

Yes, you’ll earn jack doing this.  But you’re going to earn jack anyway in a money market fund, you won’t pay a management fee
with a Treasury Direct account, and at least thus far there is no material threat of the US Federal Government throwing up gates.

Inexorably the noose tightens around your neck.  Beware.