However, the SEC is now proposing that the $1 NAV Rule, or more formally known as Rule 2A-7 of the Investment Company Act of 1940 (I hate talking in legalese but have to revert to form occasionally), is nothing more than a symbolic formality, a relic of older times. You know, like Glass Steagall.
The removal of Rule 2A-7 can lead to potentially . . . dramatic changes as it seems like a blatant endorsement of more "financial innovation"; e.g. risk taking. If approved, expect a resurgence into inflationary bubble building assets like commercial real estate, hotels, and other high beta assets.
In June, the SEC will consider radical changes to Rule 2a-7, including the elimination of the stable $1 NAV, limiting a fund's size relative to its respective market, requiring minimum cash reserves such as 10% of the fund's total assets, and requiring money funds to have insurance guarantees similar to the Federal Deposit Insurance Corporation's bank guarantee.http://www.financial-planning.com/news/
But without a $1 NAV, industry leaders fear that trillions of dollars of assets could leave the mutual fund industry for other sectors that are perhaps less suited to handle such traffic.