The Reserve to halt redemptions on funds

Reserve Management Corp. New York filed with the Securities and Exchange Commission on Friday to suspend all redemptions from its Primary Fund (RPRXX) and the U.S. Government Fund (RUGXX) and postpone the date of payment of redemption proceeds for a period longer than seven days after the tender of shares for redemption. The filing resulted from “extraordinary market conditions … which contributed to unprecedented requests for redemptions for each of these two funds,” The Reserve noted in a statement. Early in the week, the Primary Fund “broke the buck” when its net asset value fell to 97 cents per share. The price reflected the fund’s holdings of $785 million in debt securities from Lehman Brothers Holdings Inc. of New York that had lost all of its value. The Primary Fund, which had $62 billion in assets under management at the opening of business Sept. 15, received redemption requests of approximately $60 billion. The U.S. Government Fund, which had about $10 billion in assets at the beginning of the week, received redemption requests of $6 billion. Given the market’s current illiquidity, The Reserve said it “is unable to dispose of securities to fund redemptions without impairing the net asset value of each fund.” The Reserve noted in its statement that the SEC staff intends to recommend the issuance of the suspension order.