The fight over the fallen Reserve Primary Fund will continue past the one-year anniversary of when the fund broke the buck. On Monday the New York money fund manager and the SEC both confirmed that the regulators will get their day in court, on September 23, to fight the distribution plan for the remainder of the fund's assets.

For the full story on the the death of the Reserve and its Primary Fund, see MFWire's timeline.

The move follows the SEC's accusation last month that Reserve committed fraud in the wake of the Lehman Brothers bankruptcy when Primary broke the buck (see MFWire, 5/5/2009). At the time, new SEC chair Mary Schapiro cited expediting Reserve's distribution process as one of her objectives in going after the Reserve.

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Reserve press release

NEW YORK -- June 15, 2009. The Board of Trustees of The Reserve Primary Fund (the “Primary Fund”) announced that the United States District Court for the Southern District of New York has issued an Order (the “Order”) on an application made by the U.S. Securities and Exchange Commission (the “Commission”) concerning the distribution of the Primary Fund’s remaining assets.

The Commission’s application proposes a plan to distribute the remaining assets of the Primary Fund on a pro rata basis to shareholders of the Primary Fund whose shares have not been fully redeemed since September 15, 2008. The Commission also seeks an order enjoining certain claims against the Primary Fund and other parties named as defendants in litigation involving the Primary Fund. The terms of the Commission’s proposed plan are contained in a “Term Sheet” attached as an Appendix to the Court’s Order.

Pursuant to a plan of distribution adopted by the Trustees on December 3, 2008, shareholders have to date received approximately 90 percent of their assets in the Fund. As set forth in the Order, any person who objects to the Commission’s proposed relief and plan of distribution must file a statement of objection with the Court by July 22, 2009. Details about the filing of objections and upon whom such objections should be served are contained in the Order. Shareholders who do not object to the Commission’s application do not need to file any papers with the Court.

The Court will hold a hearing at 9:30 a.m. on September 23, 2009 in Courtroom 18B of the United States Courthouse, 500 Pearl Street, New York, New York on whether it will grant the Commission’s application and approve the proposed pro rata plan of distribution sought by the Commission and other aspects of the Term Sheet.

By June 22, 2009, the Primary Fund will mail copies of the Order and the Term Sheet to all owners of record for unredeemed shares in the Fund as of September 15, 16, 17 or 18, 2008. In addition, the Order, the Term Sheet and the Commission’s Memorandum of Law in Support of Its Proposed Order to Show Cause and Application for Injunctive or Other Relief are available on the Commission’s website, http://www.sec.gov/spotlight/reserve_primary_fund_investors.htm, and the Reserve’s website, www.ther.com/reservenewslist.shtml. Click here to view the Order and the Term Sheet. Click here to view the Memorandum of Law.

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SEC press release

Washington, D.C., June 15, 2009 – The Securities and Exchange Commission today posted information on its Web site for investors in the Reserve Primary Fund, which “broke the buck” last September when its net asset value fell below $1 per share. Since then, the fund has withheld a significant amount of money from investors pending the outcome of numerous lawsuits filed against the fund, its trustees, and other officers and directors of Reserve entities.

The SEC filed suit on May 5, 2009, seeking, among other things, an order to distribute the fund’s remaining assets to investors expeditiously on a pro rata basis.

On June 8, 2009, the Honorable Paul G. Gardephe of the U.S. District Court for the Southern District of New York issued an order that sets a schedule for its consideration of the SEC’s proposed plan of distribution.

Under the court order, all interested parties can file objections to the proposed distribution plan by July 22, 2009. The court will hold a hearing to consider the proposed plan of distribution on Sept. 23, 2009.

Pursuant to the court order, the SEC is directing investors to additional information on its Web site, including the SEC’s proposed distribution plan as well as the SEC’s evidence in its case against the operators of the Primary Fund. The information is available at the following link: www.sec.gov/spotlight/reserve_primary_fund_investors.htm

Investors also can find additional information on the Reserve’s Web site at: www.ther.com. 

Edited by: Neil Anderson, Managing Editor


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