The Federal Reserve Bank of New York said money-market fundinvestors should be prohibited from withdrawing all their assets atonce as a way to make the $2.5 trillion industry “safer and morefair.”

Money funds should set aside a portion of every investor'sbalance as a “minimum balance at risk” that could only be withdrawnwith a 30-day notice, the New York Fed's staff said yesterday in areport. The provision would reduce systemic risk and protect smallinvestors who don't pull out of a troubled fund quickly, accordingto the report.

“The delay would ensure that redeeming investors remainpartially invested in the fund long enough to share in any imminentportfolio losses or costs arising from their redemptions,” the banksaid today in a statement.