United States: Reserve Primary Fund Suspension, 2008

The Reserve Primary Fund, the flagship Reserve fund, increased its commercial paper holdings from 1% of the fund’s assets in July 2007 to nearly 60% of assets a year later. When the Primary Fund increased commercial paper holdings—including Lehman debt—its gross yield increased rapidly relative to that of its peers, and the fund’s assets jumped from $30 billion in July 2007 to $67 billion in July 2008; virtually all of the asset growth was commercial paper (McCabe 2010). By September 2008, the Primary Fund was the world’s third-largest money market fund and had $62.5 billion in assets under management (The Reserve 2008h). In September 2008, approximately 21% of the Primary Fund’s assets were held in financial commercial paper, including debt issued by Lehman Brothers.^FFigure 5 in the Appendix provides a detailed breakdown of the Reserve Primary Fund’s portfolio.The Primary Fund faced severe redemption pressures following Lehman Brothers’ bankruptcy filing, since the fund held $785 million (1.2% of the Primary Fund’s total AUM) of unsecured commercial paper and medium-term notes issued by Lehman (The Reserve 2008k). Without capital support from an affiliate, any loss greater than 0.5% of a fund’s assets would have been sufficient to cause the fund to break the buck, that is, to report a net asset value below $0.995 per share, the lowest point at which they could permissibly be rounded to $1.00 (ICI 2009).

Confronted with Lehman’s failure, the fund’s board pursued several options before suspending redemptions on September 16. First, in a conference call at 9:30 in the morning on September 15, the board decided on the advice of KPMG, its accounting firm, and outside legal counsel to change the accounting method for the Primary Fund from amortized cost to fair value, to reflect the impact of the Lehman bankruptcy on the NAV per share.^FThe Primary Fund calculated its NAV on an approximately hourly basis. The board also concluded that it was not in the best interest of the Primary Fund shareholders to liquidate the Lehman debt at fire sale prices amidst the credit market turmoil and near freeze of trading. Although the fund’s chief investment officer advised the board that there was indicative pricing in the market for the Lehman paper between 45% and 80% of par, the board decided to value the Lehman paper at 80% of par, the high end of that range. At that level, the value of the Primary Fund shares fell to $0.9975, just above the level required to allow the fund to maintain a NAV per share of $1.00 (SEC 2009a).

But extraordinary redemption requests during trading on September 15 forced the board to meet again at 1pm to consider further options. Under normal conditions, investors would receive payment for their redeemed shares from State Street within an hour of submitting the redemption request. At 10:10am on September 15, State Street, having received approximately $10 billion in redemptions, stopped funding redemption requests and suspended the Primary Fund’s overdraft privileges. By 1pm, redemption requests totaled $16.5 billion (Gardephe 2009a). Given the unprecedented market illiquidity, Bruce Bent Sr., the chairman of RMCI and the Primary Fund, notified the board that the fund would not be able to liquidate assets at par value to meet redemptions but would likely have to do so at “fire sale prices” (The Reserve 2008k, 2). In other words, the fair value of assets at current market prices was below par, implying that without some kind of support from its sponsors, the fund would have to break the buck. To avoid breaking the buck, the board authorized management to enter into a credit support agreement with RMCI. It also authorized management to file the required notice with the SEC about the support agreement.

By September 16, 2008, redemptions at the Primary Fund exceeded $40 billion. The fund never entered into a credit support agreement with RMCI; the SEC later determined that RMCI had misrepresented its willingness to provide credit support to the fund. Later on September 16, the board notified the SEC and issued a press release announcing that it had written off the entire value of the Lehman debt and that the fund had therefore broken the buck (SEC 2009a; The Reserve 2008b).

At one point during the run, the Primary Fund asked the Federal Reserve Bank of New York for help to avoid breaking the buck; however, the New York Fed declined, since it did not think it could stop the run. The Fed did not have the legal authority to guarantee MMFs and protect their investors from losses, and Donald Kohn, then vice chair of the Fed, characterized the Primary Fund’s request for aid from the Fed as a “ridiculous request” (Geithner 2014, 195). However, within days, the Treasury rather than the Fed had found the authority to guarantee MMF investors, and the Fed, under Kohn’s leadership, had launched its own broad-based program to lend to banks for the purpose of buying commercial paper from MMFs, described in Key Design Decisions No. 2, Part of a Package (Logan, Nelson, and Parkinson 2020).

The Reserve Funds submitted an application to the SEC to suspend redemption rights for the Primary Fund and U.S. Government Fund securities and postpone payment for shares that had requested redemption but which had not been paid; research has been unable to locate the application or determine the date on which it was sent (SEC 2008a, 1). On September 22, 2008, the SEC issued an exemptive order permitting the funds to temporarily suspend redemption rights and postpone payment for shares redeemed but not paid (SEC 2008a, 2). This SEC order was applied retrospectively beginning September 17, 2008 (SEC 2008a, 2). The SEC stated that the order was necessary for the protection of the investors and it would stay in effect until the markets were “liquid to a degree that enable[d] each Fund to liquidate portfolio securities without impairing the net asset value of each or until revoked by the commission” (SEC 2008a, 2).

Money market funds experienced a broad run by investors following the news of the Primary Fund’s breaking the buck. Marcin Kacperczyk and Philipp Schnabl estimate about $172 billion in MMF redemptions within three days. Kacperczyk and Schnabl also estimate that the total value of commercial paper outstanding fell by 15%, from approximately $1.8 trillion to $1.4 trillion, within a month of the Primary Fund’s announcement (2010).

On September 19, the US Department of the Treasury announced the Temporary Guarantee Program for Money Market Funds to arrest the run on the MMFs, and it became operational on September 29 (Shapiro 2012). The temporary guarantee program was open to all MMFs regulated under Rule 2a-7 of the Investment Company Act of 1940 with a NAV of at least $0.995 as of September 19, 2008. For a quarterly fee, the Treasury would guarantee the share price of any eligible money market mutual fund that applied and paid for the program^FThe guarantee was funded by the then–$50 billion Exchange Stabilization Fund. For more details on the temporary guarantee program, see Vergara (2022).  (US Treasury 2008a). Figure 3 charts daily money market fund flows between August and December 2008.

Source: YPFS and Brookings Institution.

The Primary Fund was not eligible for the guarantee program. However, other Reserve Funds were, according to the Reserve. In November, the Treasury entered into an agreement with the Reserve U.S. Government fund (which otherwise was not eligible) to allow the fund to participate in the temporary guarantee program^FThe Reserve announced that the Primary II Fund, Reserve Liquid Performance Money Market Fund, and Treasury and Repo Fund, were also eligible to participate in the temporary guarantee program; however, it is not clear if these funds participated in the program (The Reserve 2008j). Wilson (2020) claims to have obtained, through FOIA, a list of all fund managers that received a guarantee, and Reserve is not on it.  (US Treasury 2008b). The agreement stated that the Reserve U.S. Government Fund had 45 days to sell assets at or above their amortized cost, and the Treasury's Exchange Stabilization Fund would purchase any remaining securities after this period at amortized cost, up to an amount required to ensure that each shareholder received $1 per share. The Reserve U.S. Government Fund did not create any taxpayer losses through the temporary guarantee program (Henriques 2008).

The Treasury’s temporary guarantee program ended a year after it was announced, on September 18, 2009, and generated $1.2 billion in fee revenue. At its peak usage, the program guaranteed 366 MMF management companies and 1,486 individual funds. The guarantee gave fund managers the ability to protect investors if they were unable to maintain the value of a fund’s holdings above $0.995 and were forced to liquidate. Ultimately, no funds were forced into liquidation during the time the program was active.

The Fed also created two broad-based programs to provide liquidity to MMFs that were still experiencing runs. On September 19, 2008, the Federal Reserve launched the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility  “to assist money funds that hold such paper in meeting demands for redemptions by investors and [to] foster liquidity in the [asset-backed commercial paper] ABCP markets and broader money markets” (Fed 2008, 1). Through the AMLF, the Federal Reserve extended nonrecourse loans at the primary credit rate to US depository institutions and bank holding companies to finance their purchases of high-quality ABCP from money market mutual funds.

During the first two weeks of operation, the Federal Reserve’s AMLF loaned $150 billion to banks to purchase ABCP from MMMFs (the equivalent of 21% of all outstanding ABCP); however, its usage declined over time as redemption pressures waned and markets improved (Wiggins 2020a). Kacperczyk and Schnabl (2010) highlight that this was the first time in history that the Fed purchased commercial paper directly, and by January 2009, the Fed was the single largest purchaser of commercial paper, owning $357 billion, or 22.4% of the market, through its various lending facilities.

On October 21, 2008, the Fed also announced the Money Market Investor Funding Facility, which was “intended to provide liquidity to U.S. money market mutual funds and certain other money market investors, thereby increasing their ability to meet redemption requests and hence their willingness to invest in money market instruments, particularly term money market instruments” (Fed 2020, 5). The MMIFF would loan up to $540 billion to a series of special purpose vehicles (SPVs) that would use the funds to purchase certificates of deposit, bank notes, and commercial paper from eligible money market investors (Wiggins 2020b).

The Federal Reserve’s MMIFF expired on October 30, 2009, and was not used. Collectively, the Fed and Treasury’s programs immediately slowed the run on MMFs, but any evaluation must consider the coexistence of the other programs targeting the same problem.

The Fund had to seek SEC approval at various stages in 2008 and 2009.

First, on September 15, because the Lehman debt exceeded more than 0.5% of the Primary Fund’s total assets, the fund had to provide the SEC with a plan to handle the Lehman securities, as stipulated under Rule 2a-7 of the Investment Company Act of 1940^FUnder Rule 2a-7, since the Lehman debt exceeded more than 0.5% of the Primary Fund’s total assets the fund’s board had to determine whether it was in the best interest of the fund to dispose of the Lehman debt and notify the SEC promptly of its decision (The Reserve 2008k, 1). (SEC 2010).

Second, some sources suggest that on September 16, the Reserve Funds filed an application with the SEC for permission to suspend redemptions and postpone payments to investors, under Section 22(e) of the Investment Company Act of 1940. This section of the law provides, in part, that,

No registered investment company shall suspend the right of redemption, or postpone the date of payment or satisfaction upon redemption of any redeemable security in accordance with its terms for more than seven days after the tender of such security to the company or its agent designated for that purpose for redemption, except . . .

(3) for such other periods as the Commission may by order permit for the protection of security holders of the company” (US Congress 2023, 64–65) (author’s emphasis)

On September 22, 2008, the SEC issued a temporary order pursuant to Section 22(e)(3), with effect as of September 17, permitting the Primary Fund and the Reserve U.S. Government Fund to temporarily suspend redemptions of outstanding shares and postpone payment for shares that had already been submitted for redemption but not yet paid, until market liquidity improved so that the funds could sell their assets without impairing each fund’s NAV or until the SEC rescinded the order (SEC 2008a).

In December 2008, the SEC’s approval was again required after the closure of the fund for the fund’s proposed plan to disburse remaining funds to shareholders. As noted in Key Design Decision No. 5, Governance, the SEC did not approve of the fund’s proposed plan and brought a court action under Section 21(d)(5) of the Securities and Exchange Act of 1934 to substitute a different plan that it proposed.

Section 21(d)(5) of the Securities and Exchange Act of 1934 states that “[i]n any action or proceeding brought or instituted by the Commission under any provision of the securities laws, the Commission may seek, and any Federal court may grant, any equitable relief that may be appropriate or necessary for the benefit of investors” (SEC 2009b, 5).

Further, under Section 25(c) of the Investment Company Act, the USDC–SDNY had the authority to “enjoin the consummation of any plan of reorganization of [a] registered investment company upon proceedings instituted by the Commission . . . [where] such a plan is not fair and equitable to all security holders” (SEC 2009b, 5). The court approved the SEC’s plan of distribution.

Under Section 22(e) of the Investment Company Act of 1940, the Primary Fund was permitted to postpone payment for redemptions for up to seven days (SEC 2008c). The Primary Fund added a supplement to its prospectus on September 17, 2008, announcing that redemption payments would be no later than seven calendar days after the redemption request was received^FIn its prospectus as of September 28, 2007, the Primary Fund had outlined that it might suspend redemptions for more than seven days if trading were suspended on the New York Stock Exchange, an emergency ere declared by the SEC, or if otherwise permitted by SEC order (The Reserve 2007).  (The Reserve 2007).

The Reserve Funds was organized as a Massachusetts business trust, and under Article 9 Section 4(b) of the declaration governing the trust, either the trustees or the shareholders were authorized to liquidate the fund (The Reserve 2008l). After redemptions were frozen in the Primary Fund, while the liquidation of the fund was being decided on and administered, RMCI started posting the complete portfolio of the fund with a one-day lag (The Reserve 2008g).     

The SEC approved the fund’s application to suspend redemptions and postpone payments on September 22. On September 29, 2008, the Primary Fund’s board voted to liquidate the fund and distribute its assets to shareholders (The Reserve 2008d).

On December 3, 2008, the Primary Fund’s board approved a plan of liquidation and distribution of assets that would have distributed up to 91.72 cents per share, subject to provisions made for a special reserve. Under the special reserve proposal, the fund also would have set aside $3.5 billion for costs and damages related to more than 20 lawsuits filed against the operators of the Primary Fund after September 15 (The Reserve 2009).

On May 5, 2009, the SEC filed an action with a US District Court, pursuant to Section 25© of the Investment Company Act, to prohibit the Primary Fund from enacting its plan for distributing funds to investors in the liquidation. The SEC criticized the proposed diversion of funds to the $3.5 billion special reserve. The SEC also said that the fund’s decision to redeem some investors’ claims on September 15 at a $1.00 NAV disadvantaged other investors who tried to redeem later, and the plan was therefore not “fair and equitable” to investors (SEC 2009b, 6). The SEC took issue with the way the fund had valued the Lehman assets and calculated its NAV. Since the SEC considered the fund’s NAV calculations and communications to have been flawed, the SEC proposed a distribution plan that paid all shareholders the same pro rata amount regardless of when they had submitted their redemption request. Some shareholders were expecting to receive a NAV of $1.00, since they had received redemption confirmations for a $1.00 NAV, and filed objections to the SEC’s pro rata distribution plan (SEC 2009b). (See Key Design Decisions No. 8, Treatment of Depositors or Investors, and No. 9, Verification of Solvency.)

On November 25, 2009, Judge Paul Gardephe of USDC–SDNY issued an order enjoining the Primary Fund’s liquidation plan and approving the SEC’s proposed pro rata distribution plan. Judge Paul Gardephe’s order also reduced the amount set aside in the expense fund to $83.5 million (Gardephe 2009b).

Some funds that held Lehman debt, such as the Evergreen fund, issued statements that they would draw on available credit support from their sponsors, if necessary, to support the $1.00 NAV. The Primary Fund had no such agreements to draw upon to support its NAV, and despite representations by RMCI that it would provide credit support and board approval for the same, no such agreements were ever entered into (SEC 2009a).

Before announcing that the Primary Fund broke the buck and receiving the SEC’s exemptive order permitting suspension of redemptions and postponement of payments, RMCI, Resrv Partners, and the Bents engaged in active communications aimed at stopping the run on the Primary Fund and related funds. The SEC later sued such parties alleging among other things that these statements were materially false:

Over a two-day period in September [15–16] 2008, after the news of Lehman Brothers’ bankruptcy filing roiled the US financial markets, Defendants engaged in a systematic campaign to deceive the investing public into believing that the Primary Fund – their flagship money market fund – was safe and secure despite its substantial Lehman holdings. That campaign involved both the knowing dissemination of false information to the Primary Fund's Board of Trustees, investors, and rating agencies and, in the case of certain Defendants, the knowing concealment of the true effect of the Lehman holdings on the Fund. (SEC 2009a, 2)

The defendants issued press releases and newsletters, and their employees engaged in numerous telephone calls and meetings that disseminated inaccurate information regarding the NAV, impact of Lehman securities, redemption rates, overdraft protection, liquidity, and the availability of credit support to the Primary Fund board, shareholders, rating agencies, media, and general public.

Following the SEC’s order on September 22, 2008, the Reserve issued a press release clarifying that the order was “intended to allow us to fulfill all outstanding redemption orders and ensure an orderly sale process that [sought] to obtain best pricing for the interest of shareholders and integrity of the funds’ NAVs” (The Reserve 2008c, 1). By September 29, the Primary Fund’s board had voted to liquidate the entire fund and distribute functionally all its assets to shareholders; those shareholders who had not yet submitted a redemption request would be involuntarily redeemed (The Reserve 2008d).

Beginning on September 19, the Treasury and the Federal Reserve launched a number of programs to stem the run on the MMF industry. The Treasury stated that “maintaining confidence in the money-market fund industry is critical to protecting the integrity and stability of the global financial system” (Newman 2008, 1). See Key Design Decision No. 2, Part of a Package.

The Primary Fund calculated its NAV on an approximately hourly basis per its prospectus. Generally, the fund transferred redemption payments to its shareholders within an hour of receiving redemption requests, via its custodial bank, State Street Bank. State Street Bank paid redeeming shareholders by applying the redemption amounts against RMCI’s overdraft account. However, after State Street suspended the Primary Fund’s overdraft privileges, the fund announced a seven-day delay in transmitting proceeds of redemptions in excess of $10,000 (The Reserve 2008a). It isn’t clear from the sources we consulted whether the fund continued to honor redemptions under $10,000 after the SEC’s September 22 ruling.

Bent II had stated in an email on September 14, 2008, to RMCI’s director of marketing that providing a line of credit to the Primary Fund and supporting the $1.00 NAV was “not an option for us” (SEC 2009a, 15). However, on September 15, Bent II emailed the director of sales and marketing that RMCI would provide credit support to the Primary Fund and that it was waiting for final SEC approval to support the fund. The SEC later stated that RMCI never requested approval for credit support. Bent II also disseminated similar false statements regarding credit support to representatives at Moody’s and Standard & Poor’s and authorized the dissemination of these false statements to clients on a need basis. In some cases, based on the false information disseminated, prospective investors were assured that the Primary Fund would not break the buck, and purchases of new shares in the fund were processed until September 16.

On the evening of September 15, it appeared that the plan to slow redemption activity by convincing investors that the Primary Fund's NAV was safe had been successful: “The client base reacted positively to this news and the redemption activity slowed greatly” (SEC 2009a, 26). However, total redemption requests in the Primary Fund surpassed $20 billion by close of business September 15, 2008, but nearly half remained unfunded. The other half were largely funded through an overdraft account at the fund’s custodial bank (The Reserve 2008l). By September 16, 2008, redemption requests at the Primary Fund exceeded $40 billion.

On September 17, the Reserve published NAVs for several funds including the Primary Fund and stated that all redemption requests received for the fund before 3pm on September 16 would be redeemed at an NAV of $1.00. The SEC would later assert that at the time the Reserve Funds made the statement, its management knew it was false and was unfair to shareholders. The SEC’s enforcement action is described in further detail in Key Design Decision No. 10, Other Conditions. On September 30, 2008, the board of trustees of the Reserve Funds announced that the first distribution to the fund’s investors would occur around October 13, 2008 (The Reserve 2008e). However, the initial distribution was delayed until October 30, 2008, due to technical challenges arising out of using a NAV under $1.00, among other issues (The Reserve 2008h).

On October 2, 2008, the Reserve announced that it would post the complete portfolios of the Primary Fund and the U.S. Government Fund with a one-day lag to better inform the funds’ investors (The Reserve 2008g). Ultimately, under the approved plan of distribution, all distributions were made pro rata, including the interim distributions made before the final liquidation plan was approved (The Reserve 2008l).

TD Ameritrade and Ameriprise Financial said that they would reimburse their clients for up to a 3% loss in the Primary Fund (Anand and Scannell 2012). Some investors in the Primary Fund were therefore able to recover their entire investment since TD Ameritrade and Ameriprise Financial agreed to mitigate potential losses.

The Primary Fund’s investors eventually regained access to most of their money through eight distributions that occurred after September 15, 2008, with the final distribution taking place on December 9, 2014. Figure 4 shows the asset distribution schedule. The final recoveries for the fund’s shareholders amounted to 99.1 cents on the dollar (Primary Fund-In Liquidation 2014a).

Sources: Primary Fund-In Liquidation 2014a; 2014b; The Reserve 2008e; The Reserve 2008l; The Reserve 2010a; The Reserve 2010b.

When Bruce Bent and his partner Henry B. R. Brown launched the first MMF in 1970, they developed the funds to provide investors with immediate liquidity and safety of principal invested amounts. Money market funds are subject to stringent regulations to ensure their safety and liquidity. Mary L. Shapiro, then-chair of the SEC, has said that although investors ultimately lost only one penny per share, the real damage was caused by the loss of liquidity promised by the Reserve Primary Fund. Investors in the Primary Fund who temporarily lost access to liquidity could have been unable for months to make mortgage payments, pay employees’ salaries, or fund their businesses (Shapiro 2012).

Shareholders in the Primary Fund also filed a class action lawsuit against the operators of the fund (Church 2013). As part of a court-approved settlement, they were awarded $55 million in January 2014 (Primary Fund In Liquidation 2014).

One of the reasons the SEC alleged that the operators of the Primary Fund were liable for federal securities law violations was the discrepancy in the fund’s NAV calculation for September 15 and 16, 2008. The Reserve later admitted that the fund’s NAV calculation was wrong, blaming an “administrative error” on September 16, 2008, and should have indicated that the fund broke the buck when its NAV reached $0.9944 at 11am on September 16, earlier than previously stated (SEC n.d., 5). The Reserve explained that this error occurred because the fair-value markdown to Lehman securities was not taken into consideration on September 16, and the Primary Fund’s assets were overstated by approximately $170 million (The Reserve 2008i). When the SEC submitted its pro rata distribution plan for the Primary Fund’s assets on May 5, 2009, it stated that the fund’s NAV calculations from those days were “hopelessly and irreparably compromised by inaccurate and incomplete information” (SEC 2009b, 2).

Owing to the unreliability of the fund’s NAV calculation, the hierarchy of claims for unpaid shareholders who redeemed on September 15 and 16, 2008, and the NAV per share value of their redemptions were examined during legal proceedings. Some shareholders received confirmations that their redemption requests were received and would be paid out at the stable NAV of $1.00 per share, but the SEC stated that these confirmations were based on erroneous NAV calculations and did not create a contractual right to receive a $1.00 per share redemption. A few investors who redeemed early also claimed that they became unsecured creditors as opposed to shareholders when they received confirmation of redemptions requests. However, the SEC stated that this reasoning was flawed since all fund investors were creditors of the fund, regardless of their redemption activity.

The SEC also alleged that Bent II instructed the director of fund accounting to secretly record receivables transactions for the Yield Plus Fund and International Liquidity Fund totaling $17 million, to avoid disclosing that these funds had broken the buck before the Primary Fund. When the Primary Fund broke the buck, these transactions were reversed (SEC 2009a).

The Reserve Primary Fund and Reserve U.S. Government Fund agreed to suspend sales in the funds when the SEC granted their application to suspend redemptions in the funds (SEC 2008a). Owing to the Reserve U.S. Government Fund’s agreement with the Treasury, the U.S. Government Fund’s advisers and trustees were required to waive their fees accrued after November 19, 2008, to the extent that fund shareholders did not receive distributions of $1.00 per share (US Treasury 2008b).

The SEC filed an enforcement action against RMCI, Resrv Partners, the Reserve Primary Fund, and the controlling persons of RMCI—Bruce Bent Sr. and Bruce Bent II—alleging several counts of securities law violations. The SEC provided evidence that the defendants published or authorized the dissemination of several false statements and concealed material facts from the board of trustees, investors, and rating agencies (See Key Design Decision No. 6, Communication and Disclosure). After a four-week civil trial at the USDC–SDNY, the Bents were cleared of the fraud charges; however, the court found Bent II liable for one claim of negligence (Grind and Steinberg 2012). Judge Paul Gardephe awarded $750,000 to the SEC, instead of the $130 million in damages the SEC sought (Raymond and Stempel 2013). Judge Gardephe also declined to order a permanent injunction from engaging in activities subject to securities law against the Reserve entities and Bruce Bent II.

The Primary Fund’s liquidation process took more than six years, and the fund was terminated in late December 2015 (Primary Fund In Liquidation 2015, 1).

Following the Global Financial Crisis of 2007–2009, the SEC amended Rule 2a-7 of the Investment Company Act of 1940 to enhance the regulatory regime for MMFs and mitigate the systemic risk posed by MMFs (Shapiro 2009; Su 2020). These amendments were approved in January 2010 and provided adherence to strict levels of credit and interest rate risks, high diversification requirements, periodic stress testing, disclosing monthly portfolio information, three new liquidity requirements, and procedures to deal with money market funds that break the buck (ICI 2012b).

Following this amendment, the Investment Company Institute published a checklist for suspending redemptions and liquidating a MMF that outlines the major steps to follow before suspending redemptions (ICI 2011).

Also of note is that then-SEC Chair Shapiro highlights in her testimony on June 21, 2012, before the US Senate, that although the SEC amended regulations in 2010 to make MMFs more resilient, they remained susceptible to runs and posed systemic risks (2012).

Evidence gathered following the run on MMFs during the COVID-19 pandemic suggests that the SEC reforms adopted in 2010 and 2014 to strengthen MMFs were not effective at preventing runs and may have in fact contributed to the runs (US GAO 2023).