Reserve Primary Fund

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The Reserve Primary Fund was a large money market fund. It is notable for being the only major money market fund to break the buck during the financial crisis of 2007-2008. The fund at one time had $60 billion in assets.[1]

Failure[edit]

On September 16, 2008, because of its exposure to Lehman Brothers debt securities, its share price fell to $0.97, despite its goal to maintain a share price of $1.00 ("breaking the buck"). Redemptions from investors were frozen to prevent a run on the fund.[2]

As of October 27, 2009, the fund set aside $3.5 billion to cover expenses.[1]

On November 25, 2009, a U.S. district judge ordered the fund to make pro-rata distribution of almost all remaining assets to shareholders.[3]

By December 2014, the fund had paid out $0.991 cents per share.[4]

The fund was finally liquidated in June 2016.[5]

TD Ameritrade customers[edit]

In exchange for commissions, TD Ameritrade recommended that its customers invest in the fund and the fund gained $1 billion in assets as a result of this relationship. TD Ameritrade was accused of having a conflict of interest as a result of commissions that it received, for having poor marketing ethics, and for misrepresenting the safety of the investment. In 2008, TD Ameritrade agreed to reimburse its customers for up to a 3% loss in the Reserve Primary Fund, or up to $50 million. In 2011, the company settled the SEC case and agreed to pay 1.2¢ per share of the Reserve Yield Plus Fund that was held by its customers, or $10 million in total.[6][7][8][9][10][11][12][13]

References[edit]

  1. ^ a b "The Reserve to give back $1B to Primary Fund investors". Associated Press. Sep 23, 2009.
  2. ^ Siegel Bernard, Tara (September 17, 2008). "Money Market Funds Enter a World of Risk". The New York Times.
  3. ^ "ECF CASE 09 Civ. 4346 (PGG) MEMORANDUM OPINION" (PDF). U.S. Securities and Exchange Commission. November 25, 2009.
  4. ^ "Primary Fund-In Liquidation Update, Federal Court Approves Final Distribution" (PDF). September 23, 2014.
  5. ^ "ADDITIONAL INFORMATION REGARDING YIELD PLUS FUND-IN LIQUIDATION (Formerly known as Reserve Yield Plus Fund) DATE OF FINAL DISTRIBUTION WEDNESDAY, JUNE 15, 2016" (PDF). June 14, 2016.
  6. ^ HOLZER, JESSICA; MAXEY, DAISY (February 4, 2011). "TD Ameritrade Settles SEC Case Over Reserve Fund". The Wall Street Journal.
  7. ^ Oneal, Michael (November 2, 2008). "Fund losses fuel customers' anger; Revenue-sharing deal raises questions of conflict". Chicago Tribune.
  8. ^ MAXEY, DAISY (September 12, 2009). "Reserve Yield Plus Investors in SEC Plea". The Wall Street Journal.
  9. ^ ANAND, SHEFALI; SCANNELL, KARA (September 25, 2008). "Ameritrade to Make Clients Whole on Primary Fund". The Wall Street Journal.
  10. ^ AMBROSE, EILEEN (December 16, 2008). "Investors feel burned by what looked like a money market fund". The Baltimore Sun.
  11. ^ "Investors in fallen money fund Reserve Yield Plus can't access cash". New York Daily News. Associated Press. October 3, 2008.
  12. ^ "SEC Charges TD Ameritrade for Failing to Supervise Its Representatives Who Sold Shares of the Reserve Yield Plus Fund" (Press release). U.S. Securities and Exchange Commission. February 3, 2011.
  13. ^ "TD Ameritrade investors in Reserve money fund could share settlement". USA Today. Associated Press. February 3, 2011.