Reserve Management Company, Inc. announced yesterday that on December 18, 2008, the staff of the SEC’s Division of Enforcement informed RMCI of the staff’s intention to recommend that the SEC bring an enforcement action against RMCI alleging violations of certain provisions of the federal securities laws. In addition, the staff also intends to recommend enforcement actions against:
- Bruce Bent, President of RMCI and President and Chairman of the Board of each Fund;
- Bruce Bent II, Senior Vice President of RMCI and Co-Chief Executive Officer of each Fund; and
- Arthur Bent III, Chief Operating Officer and Treasurer of RMCI and Co-Chief Executive Officer of each
RMCI stated that the company as well as all three individuals expect to defend vigorously against the allegations. The company did not explain what the charges related to.
In September 2008, as discussed here, RMCI’s Primary Fund became the first money-market mutual fund to ever expose retail clients to losses by “breaking the buck.” Although not guaranteed, money-market mutual funds shares historically remain at $1.00 per share. The Primary Fund’s problems reportedly resulted from its holdings of $785 million in unsecured debt of Lehman Brothers, which were written down to zero after the investment bank filed for bankruptcy on September 15.
