Corporate & Securities Law

SNSFE Continues To Investigate Complaints Against Reserve Management Funds

By James Eccleston

Massachusetts securities regulators have begun to probe complaints against Reserve Management Company, the New York asset manager that shook investors in September with news of a money-market fund loss.

The office of Massachusetts Secretary of the Commonwealth William Galvin has received some complaints about Reserve Management and is looking into them, said a spokesman for the office. Reserve Management didn't return calls for the Wall Street Journal article. 

Reserve Management announced September 16 that its flagship Primary fund had "broken the buck" -- that is, fallen below the money-market fund industry's $1-a-share standard.  The loss stemmed largely from its investment in short-term debt of Lehman Brothers Holdings, which has filed for bankruptcy protection. 

The news touched off a rush of withdrawals from Reserve Primary and throughout the money-fund world.  Those redemptions appear to have slowed recently.  Money-market fund assets increased by $49 billion in the week ended Tuesday to $3.388 trillion according to the Money Fund Report, which is published by iMoneyNet.

But in recent days, some investors have complained that they haven't been able to get their money out of Reserve Management's funds quickly enough.  The Primary fund, which had about $62 billion in early September, has redeemed about $10 billion.  Reserve Management, which received a temporary order from the SEC to postpone payment, has announced plans to distribute an additional $20 billion on a pro-rata basis in mid-October, and said other redemptions will follow when money becomes available as assets mature or are sold.  The firm also plans to liquidate its Government Fund.

Lawyers at SNSFE continue to investigate complaints against Reserve.

Source:  Wall Street Journal 10/09/08

Full post as published by FinancialCounsel on October 22, 2008 (boomark / email).