Another day, another
accusation of fraud. The latest case involves money market pioneer Reserve Management Co., which Massachusetts' top securities regulator
has charged with making
false statements concerning its Primary Fund that melted down after
infamously "breaking the buck" late last year.
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Secretary of State William Francis Galvin said in his
complaint that the fund manager lied to investors about supporting the Primary Fund even as it faced a wave of client redemptions after the bankruptcy filing of Lehman Brothers Holdings Inc.
By breaking the buck, Primary Fund's net asset value fell below the $1
threshold -- a key barometer when it comes to the health and stability
of money market funds.
Reserve Management held a big position in Lehman's commercial paper before the Wall Street firm's failure.
"Dire financial reverses are unfortunate and not uncommon over the last
year, but that is no excuse for financial managers to feed untruths to
their clients," Galvin said.
The administrative complaint was filed against Reserve Management
as well as firm co-founder Bruce Bent II. The remedies sought in the
complaint include restitution for all Massachusetts investors in the
Primary Fund as of Sept. 15 and Sept. 16, a censure of Reserve
Partners and an administrative fine. -
Donna Block
The complaint and exhibits
