The hits keep coming for Reserve Management Co., the mutual fund that “broke the buck” back in September 2008. On Tuesday, Massachusetts’ top securities regulator accused Reserve executives in an administrative complaint of misrepresenting the fund’s safety in an ultimately futile bid to prevent investors from pulling out cash.
The company has already been the subject of numerous lawsuits and, in late December 2008, disclosed that the staff of the SEC’s Division of Enforcement informed it of the staff’s intention to recommend that the SEC bring an enforcement action against Reserve Management and certain executives alleging violations of the federal securities laws. That case has not yet been filed.
According to the AP, Secretary of State William Galvin’s complaint “alleges that Reserve sales workers were directed by managers to reassure investors that they could not lose money, even though Reserve’s Primary Fund had made an investment in unsecured debt of Lehman Brothers,” which later went bankrupt.