Reserve Primary Fund execs cleared of fraud
It was a seismic event when the Reserve Primary Fund broke the buck back in September 2008, thanks mainly to its holdings of Lehman Brothers bonds.
When the money market fund completely collapsed, it quickly became an enforcement issues. Four years later, it stands as one of the most important efforts by the SEC to hold individuals accountable via civil charges for alleged wrongdoing in the financial crisis. The SEC took on a giant in the money market industry, Bruce Bent, and his son, the co-managers of the fund.
As fate would have it, a federal jury cleared the two of charges that they fraudulently misled investors, regulators and trustees about their ability to keep the fund viable as clients exited, according to media reports. In a silver-lining victory, the jury found the younger Bent guilty on one claim of negligence for his role in interacting with investors. The jury also found that the fund's adviser, Reserve Management Co., guilty on two claims of fraud and one claim of negligence. The company's broker-dealer distribution arm was found guilty on one claim of fraud.
The SEC was hoping for a more symbolic and clear-cut victory, but wasn't to be. Money market funds continue to be a huge issue in the industry, as regulators struggle to pass reforms that would make "break-the-buck" incidents less likely. The SEC suffered a setback when it became clear recently that its reform package did not have enough commissioner votes to pass.
- here's an article in the Washington Post