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Compliance June 16, 2009
SEC Will Move To Block Reserve Fund Suits
The Securities and Exchange Commission (SEC) will ask a federal judge to block some investor lawsuits against the failed Reserve Primary Fund to ensure all shareholders get as much money as possible, the New York Times reported.
Reported by Rebecca Moore
U.S. District Judge Paul G. Gardephe for the Southern District of New York will hold a hearing on September 23 to consider an SEC request that “certain claims” against the failed money market fund be blocked, according to a June 8 court document. The SEC said blocking private litigation will help ensure the fund’s remaining assets are divided evenly, according to the Times.
The commission sued the managers of Reserve Primary in May, accusing them of misleading shareholders about the safety of the fund after it suffered losses on Lehman Brothers Holdings debt (see “Reserve Management Execs Accused of Fraud in Money Fund Debacle“). The Reserve Fund is also facing a lawsuits brought by Ameriprise Financial and a hedge fund (see “Lawsuits Spring up from Lehman Brothers Fall“).
Last October, Reserve Primary Fund, which helped set off the financial crisis after it “broke the buck,” said it will return at least one-third of investors’ money (see “Reserve Primary Fund Promises $20B in Shareholder Repayments“).
More information about the SEC’s position is available here.