MutualFundWire.com: Another Brokerage Moves to Protect Investors in Reserve Fund

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Friday, September 26, 2008

Another Brokerage Moves to Protect Investors in Reserve Fund

RBC's US Wealth Management unit is the latest to announce a move to protect clients who invested in The Reserve's Primary Fund, whose net asset value fell below $1.00 per share last week. RBC, on behalf of its Ferris Baker Watts subsidiary, has committed up to $35 million to protect affected clients.

This comes on the heels of similar moves by TD Ameritrade, which is providing up to $50 million of its own money (see The MFWire, September 24, 2008) followed by Ameriprise, which is putting up $33 million (see The MFWire, September 25, 2008).

Company Press Release

NEW YORK, Sept. 25 /PRNewswire-FirstCall/ - Royal Bank of Canada (RY on TSX and NYSE) today announced that it has committed up to $35 million to protect clients who have invested in the Reserve Management Co. Primary Fund, a U.S. money market mutual fund managed by a third-party provider.

The Primary Fund recorded a net asset value (NAV) below $1.00 per share, by recently reporting a NAV for The Primary Fund of $0.97 per share. Since then, assets held by individual investors in the fund have been inaccessible.

RBC's US Wealth Management unit, on behalf of its independent subsidiary, Ferris, Baker Watts (FBW), last week initiated a redemption request for FBW client assets invested in The Primary Fund and is taking this additional action to mitigate client losses up to 3 cents per share should clients receive less than $1.00 per share when the fund is liquidated.

Money market funds managed by RBC are not impacted by this issue. RBC is confident in its ability to maintain the NAV of its money market funds.

"We are taking this step, in partnership with the Investment Executives at FBW, to provide additional protection for the assets of FBW clients," said John Taft, head of US Wealth Management. "This is an example of RBC's willingness to use its global resources to address the needs and concerns of our wealth management clients during this period of extraordinary market volatility."