Reserve Primary Fund settles shareholder suit for $54.9M

Sep 9, 2013 @ 1:26 pm

Bruce R. Bent II, president of the $62.5 billion Reserve Primary money-market fund that failed during the financial crisis, agreed to settle a shareholder lawsuit in an accord worth about $54.9 million.

Bent and his father, Bruce R. Bent, are among defendants that agreed to pay $10 million in cash, drop their claim for $42.4 million from a court-established expense fund, and to allow $2.5 million from the expense fund to go to shareholders. None of the defendants admitted wrongdoing as part of the proposed settlement to end a class-action lawsuit lead by Third Avenue Institutional International Value Fund LP.

The suit was filed in September 2008, two days after Lehman Brothers Holdings Inc. went bankrupt in the midst of the worst U.S. economic crisis since the Great Depression. The Reserve Primary money-market fund held $785 million in Lehman debt. A run on the fund triggered its failure when it “broke the buck” by failing to maintain a $1-a-share net asset value.

A federal jury found Bruce Bent II negligent on one claim of violating a securities law. His father was absolved of all claims in a suit by the U.S. Securities and Exchange Commission.

The fund's closure sparked an investor run on other money funds eligible to buy corporate debt. As they scrambled to sell holdings to meet redemptions, global credit markets froze. The panic abated after the U.S. Treasury guaranteed money-fund shareholders against default for a year and the Federal Reserve began financing the purchase of fund holdings at face value.

The settlement is subject to court approval.

(Bloomberg News)


What do you think?

View comments

Recommended for you

Featured video


Regulators' gloves are coming off with cybersecurity. Put up your dukes with these tips

Updated guidelines and some of the first-ever rule enforcements signal that regulators are getting serious about holding firms accountable for data breaches, according to special projects editor Liz Skinner and technology reporter Ryan Neal.

Recommended Video

Keys to a successful deal

Latest news & opinion

Blackrock exposed data on 12,000 financial advisers

The data appeared in three spreadsheets, linked on one of the New York-based company's web pages dedicated to its iShares exchange-traded funds

Advisers throw cold water on FIRE movement

Millennials love it, advisers don't: Turns out, extreme early retirement is a suitable goal for almost nobody.

10 universities with the most billionaire alumni

These 10 American schools have the greatest number of alumni who are billionaires.

Top-performing ETFs of 2018

The markets took a beating last year, but these exchange-traded funds bucked the trend

Morningstar says investors rushed the exits in 2018

Net flows into mutual funds and ETFs were the lowest since the 2008 financial crisis, while money-market funds captured inflows.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print