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SOURCE ROOM

SEC Charges Operators of Reserve Primary Fund With Fraud (Press Release 2009-104, May 5, 2009)

U.S. Securities and Exchange Commission

Claims Supported by This Source

  1. On September 16, 2008, the Reserve Primary Fund's net asset value fell below $1 per share ("broke the buck"), causing MMF investors to incur losses.
  2. The fund held $785 million in securities issued by Lehman, and it became illiquid, unable to meet redemption requests on September 15, the day Lehman filed for bankruptcy protection.
  3. SEC's allegations: The management company (RMCI) and its chairman and vice-chairman indicated they intended to provide credit support to maintain the $1 NAV, when they had no such intention, significantly underreported the volume of redemption requests, and failed to provide accurate information to trustees about the value of Lehman securities.
  4. The SEC asked the court to expedite the pro-rata distribution of the remaining assets (May 5, 2009, U.S. District Court for the Southern District of New York).

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