The Securities and Exchange Commission yesterday filed civil fraud charges against a large money market fund and two of its executives, alleging that the Reserve Primary Fund misled investors about potential losses connected to the bankruptcy of Lehman Brothers.
Last September, Lehman's collapse caused the $62 billion Reserve Primary Fund, which loaned money to the investment bank, to "break the buck," meaning that the value of assets fell below the level needed to repay investors for each dollar put into the fund.
The development triggered widespread fear that the $4 trillion money-market-fund business, which individuals and companies usually treat as safe places to put their money, could see damaging runs. It prompted the creation of a $50 billion Treasury Department program to safeguard money market fund assets, as well as massive Federal Reserve programs to assist the market.
The SEC complaint, filed in a U.S. District Court in New York, alleges that the New York-based Reserve Management Co., its chairman Bruce Bent Sr. and its vice chairman Bruce Bent II understated the volume of redemption requests and failed to provide trustees with accurate information about the value of Lehman securities as Lehman Brothers filed for bankruptcy.
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/05/AR2009050503903.html