The SEC just announced it would go after the remains of the Reserve Primary Fund, and the Bent family that ran it, for fraud. The complaint is here, and the allegations look like the usual nondisclosure of bad news type stuff (usual to someone who doesn't track securities fraud very closely, anyway), with the remedy being a pro rata distribution of the Fund's remaining assets.
The key, though, appears to be that the Fund didn't reveal how exposed it was to Lehman Brothers (the defendants are there "for failing to provide key material facts to investors and trustees about the fund's vulnerability as Lehman Brothers Holdings, Inc. sought bankruptcy protection," as the SEC puts it). Since Reserve Primary did tell everyone this three days after Lehman folded, the allegation appears to be that the three day delay was fraudulent. Yikes!
One interesting question is whether this is sorta a case broken by journalists, given that the SEC has been talking about hiring them - the WSJ did a takedown of Reserve Primary, alleging that the putatively staid fund began chasing alpha with more exotic investments, in December. It didn't emphasize the Lehman exposure angle, but maybe there isn't too much gap between that story and this complaint.
Okay, back to the fascinating foum. HT: Securities Mosaic
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