Money Market Fund Law and Legal Definition

A money market fund is an open-ended mutual fund. An investment is made only in short term debt obligations in a money market. Examples are treasury Bills and commercial papers. In the U.S., money market funds are regulated by the Securities and Exchange Commission (SEC) and the Investment Company Act of 1940.

A money Market Fund primarily aims at preservation of principal. In a money market fund, net asset value remains constant and interest fluctuates. A money market fund provides investors with a safe place to invest easily accessible cash-equivalent assets. A money market fund is a low-risk and low-return investment. Although a money market fund is not insured by the Federal Insurance Corporation, risk in a money market account is low compared to bank accounts. Money market funds are important providers of liquidity to financial intermediaries. Usually banks, mutual funds, and brokerage firms offer money market funds.