Reserve Fund Trial Begins Today

SEC has charged money fund execs with misleading investors.

Reserve Primary Fund, the failed $62.5 billion money-market firm, begins trial today on civil claims by the U.S. Securities and Exchange Commission that it misled shareholders about the safety of its fund after it lost money on Lehman Brothers Holdings Inc. debt.

Reserve, which held $785 million in Lehman debt, caused a run on money-market funds after its net asset value fell below $1 a share on Sept. 16, 2008, the day after Lehman filed the biggest bankruptcy in history. The failure of Reserve, the first money fund in 14 years to “break the buck,” contributed to a global financial crisis.

‘Systematic Campaign’

“Defendants 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 SEC said in its complaint.

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