Reserve Primary Fund’s SEC Trial Postponed Until Oct. 9
Reserve Primary Fund’s trial in a lawsuit filed by the U.S. Securities and Exchange Commission was postponed until Oct. 9, according to court records.
The SEC sued managers of Reserve Primary in May 2009, accusing them of misleading shareholders about the safety of the fund after it suffered losses on Lehman Brothers Holdings Inc. debt. Reserve’s net asset value fell below $1 a share on Sept. 16, 2008, making investors vulnerable to losses and triggering a run on money-market funds that worsened the global financial crisis.
The trial was previously set to start Oct. 1. U.S. District Judge Paul Gardephe in Manhattan, who is presiding over the case, didn’t give a reason for the delay in an order filed today.
At a Sept. 12 hearing before Gardephe, a lawyer for the defendants told the judge he was hopeful a settlement could be reached with the U.S.
The SEC accuses Bruce R. Bent, the founder and chief executive officer of Reserve Partners, which ran Reserve Primary, and his son, Bruce Bent II, the firm’s president, of violating federal securities laws by making misleading statements to investors and trustees in the run-up to the collapse of the $62.5 billion Reserve Primary Fund in September 2008.
The fund, which held $785 million in debt issued by Lehman, became the first money fund in 14 years to expose investors to losses when Lehman filed for bankruptcy protection.
Bent and his New York-based firm deny they made false or misleading statements and say that the Lehman bankruptcy on Sept. 15, 2008, precipitated a wave of redemptions by investors that continued through the following day.
John Dellaportas, a lawyer for the defendants, declined to comment on today’s filing.
The case is SEC v. Reserve Management Co. Inc. 09-cv-04346, Southern District of New York (Manhattan).
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