Investors in a second mutual fund managed by The Reserve have filed a lawsuit in federal court and will seek to have it certified as a class action. This is said to have opened a new front in the expanding legal battle against the company. The lawsuit accuses The Reserve of misleading the thousands of investors in the firm’s Yield Plus fund by pursuing risky investments, rather than preserving capital. Those investments included commercial debt of Lehman Bros., which as you know sought bankruptcy court protection in September, triggering a freeze on the $1.1 billion Yield Plus fund.
The lawsuit also charges that TD Ameritrade misled hundreds of its clients who placed their assets in the fund by describing it as “just like a money market.” In fact, Yield Plus is a diversified mutual fund that made “significantly riskier” investments than a money market fund. The Yield Plus investors “could face double-digit percentage losses.”
The Reserve already faces at least 16 other federal lawsuits involving its flagship Primary fund, a $64 billion money market mutual fund similarly frozen after Lehman’s bankruptcy. The Primary fund dropped below the $1-per-share standard – referred to as “breaking the buck” — the day after Lehman’s bankruptcy filing. This prompted a wave of investor withdrawals that rocked the mutual fund industry and caused the federal government to step in with a temporary insurance plan. But Yield Plus, which also “broke the buck,” is not covered by the controversial Washington rescue effort. Many Yield Plus investors are complaining to the Securities and Exchange Commission and state regulators that Reserve and TD Ameritrade gave them false or misleading information. Darren Robbins, a lawyer with Coughlin Stoia Geller Rudman & Robbins, located in San Diego, California, filed this lawsuit on behalf of investors.
Source: USA Today
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.