Assets frozen after the Reserve Primary Fund 'broke the buck' are still in legal limbo.
For Kirk Rocheford, Wall Street's financial crisis has finally reached right into his wallet. He's one of the hundreds of thousands of average investors with money invested in the Reserve Primary Fund, which last week became only the second money market fund since 1970 to "break the buck" or have its value fall below $1 per share.
Rocheford, a customer of Ameriprise-owned broker-dealer Securities America, cannot make withdrawals from his money market account, and he's been scouring the Web and calling regulators to try to figure out what will happen to his money. Not only are his kids' college savings in the account, but his four-person automotive distribution company's retirement plans also are invested in the Primary Fund.
"We put it in a money market, how can you make it safer than that?" said 48-year-old Rocheford of Elko.
Ameriprise Financial spokesman Ben Pratt said client assets in Reserve's Primary Fund and the U.S. Government Fund remain frozen, affecting some Ameriprise ONE Financial Accounts, which are combination bank and brokerage accounts.
Pratt said the company is keeping advisers up-to-date with daily conference calls and is lobbying Congress and regulators for assistance, including a request to be included in the U.S. Treasury's $50 billion guaranty program for U.S. money market mutual funds.
Ameriprise, which has $3.2 billion worth of client and company money in the Primary Fund, sued Reserve Management Co. and its founder, Bruce Bent, on Friday, alleging the money market fund company tipped off institutional investors about its bankrupt Lehman Brothers holdings and the condition of its ailing money market fund. Ameriprise contends that this caused institutions to request $41 billion in redemptions before Reserve notified Ameriprise and other retail clients that its fund's net asset value was in danger of falling below $1.
A Reserve spokeswoman declined to comment on the case.
On Tuesday in U.S. District Court in St. Paul, an attorney representing several large companies, including Time Warner and Home Depot, said his clients weren't tipped off to the Primary Fund's status. But both companies had coincidentally requested money, which they have not yet received, to pay previously announced dividends to shareholders.
U.S. District Judge Paul Magnuson Tuesday lifted the temporary restraining order he'd issued Friday that prevented Reserve from processing redemption requests. "The [Securities and Exchange Commission] can and should be able to handle this matter," he said. The agency on Monday ordered Reserve Fund to create an orderly liquidation plan for its assets. Until then, Reserve must suspend redemption and postpone repayment for any shares requested as of last Wednesday.
This concerns Rocheford, the Securities America customer. "The fact that funds are locked up ... you start to wonder, is there anything there?''
Kara McGuire • 612-673-7293