A lawyer for the failed Reserve Primary Fund told the federal judge he’s hopeful about reaching a settlement in a lawsuit filed by the U.S. Securities and Exchange Commission.
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 enormous number or redemptions, which coincided with a period of extreme turmoil in the nation’s credit markets, left the fund unable to sell assets sufficient to pay redemptions as they came due,” Dellaportas said in court papers. “As a result, the fund had to suspend trading, and thereafter underwent a court-supervised liquidation.”