The SEC today filed civil fraud charges against the managers of the Reserve Primary Fund, which once had assets of $62 billion, according to a news release from the agency.
The suit, filed in U.S. District Court in New York, claimed the managers did not provide key material facts to investors and trustees about the funds investments in Lehman Brothers Holdings, which sought Chapter 11 bankruptcy protection Sept. 15.
The SEC alleges that Reserve Management Chairman Bruce Bent Sr. and Vice Chairman Bruce Bent II engaged in a systematic campaign to deceive the investing public into believing that the Primary Fund their flagship money market fund was safe and secure despite its substantial Lehman holdings, the complaint said.
The fund, which held $785 million in Lehman-issued securities on Sept. 15, became illiquid when it was unable to meet investor requests for redemptions, the SEC said.
The SEC is seeking unspecified financial penalties, disgorgement and prejudgment interest, as well as the distribution of the funds remaining assets to investors.
Reserve Management officials could not be reached by press time for comment