WASHINGTON — Federal regulators on Tuesday accused Reserve Management Co. and its two top executives of fraud, saying they withheld key facts from investors when its big money-market fund "broke the buck" last fall.
The Securities and Exchange Commission filed a civil complaint against Reserve Management, Chairman Bruce Bent Sr., 71, and Vice Chairman and President Bruce Bent II, 42. The SEC said the pair failed to provide "key material facts" about the shaky situation of Reserve's Primary Fund after Lehman Bros. Holding Inc. filed for bankruptcy protection in September.
New York-based Reserve Management said it "intends to defend itself vigorously" against the SEC's allegations. "We are hopeful that this matter can be resolved quickly," Bruce Bent Sr. said.
The $60-billion Primary Fund "broke the buck" when the value of its assets fell to 97 cents per investor dollar put in -- below the dollar-for-dollar level needed to fully repay investors. The company has said it now expects investors could receive an estimated 91.7 cents for every dollar they put in to the fund.
The SEC is seeking unspecified civil fines and restitution from Reserve Management and the two executives. The SEC said it also was attempting to expedite the distribution of the Primary Fund's remaining assets to investors.