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Wednesday, October 10, 2012

So Begins the Trial of Bruce Bent

News summary by MFWire's editors

In money market mutual fund news, the trial of the father of money funds began yesterday, InvestmentNews says its "time to brace for new money fund rules," and an international body offered its take on the money fund reform fight.

For the full story on the lawsuit so far and the death of the Primary Fund, see MFWire's timeline.

Enter Day One of the Trial of the Bents

More than four years after their $62.5-billion flagship Reserve Primary Fund [profile] broke the buck after the collapse of Lehman Brothers, Bruce Bent Sr. and Bruce Bent II were in court yesterday in New York City in the U.S. District Court for the Southern District of New York as their lawyer and one for the SEC presented opening arguments. The thrust of the SEC's case is the claim that the Bents tried to save Reserve but not the fund's investors, even as they reassured those investors.

"The evidence shows, it was a lie, plain and simple," the SEC's lead attorney, Nancy Brown, told the jury.

Bloomberg, Law360, Reuters and the Wall Street Journal all covered day one of the trial.

Brown presented the SEC's opening arguments, and John Dellaportas countered with an opening argument for the Bents. The WSJ expects up to 95 witnesses to testify, with Bruce Bent Sr. himself slated for tomorrow. U.S. District Judge Paul Gardephe estimated that the trial will take three weeks.

The IOSCO Speaks

Also yesterday, the International Organization of Securities Commissions (IOSCO) released a report on money funds [full report]. The report endorses numerous ideas that are unpopular with the money fund industry, like floating NAVs, redemption restrictions and capital requirements. Yet the IOSCO noted that its recommendations were opposed by a majority of the SEC commissioners, and ICI chief Paul Schott Stevens attacked the IOSCO for supporting "flawed regulatory proposals."

Bloomberg, the Business Standard, CentralBanking.com, Global Custodian and Reuters all covered the IOSCO's report.

Prepare Your Clients

On Sunday the editors of InvestmentNews argued that when U.S. Treasury Secretary Tim Geithner asked the Financial Stability Oversight Council (FSOC) he leads to step into the money fund reform fight, "changes became almost inevitable."

"Now is the time for advisers to being to prepare their clients for the coming changes," the trade pub wrote. "At the very least, clients may have to accept a floating NAV." 

Edited by: Neil Anderson, Managing Editor

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