DENVER—Colorado’s Securities commissioner has filed a complaint against a New York money market fund saying it violated Colorado’s anti-fraud provisions.
Commissioner Fred J. Joseph announced the complaint Tuesday against The Reserve Fund and the Reserve Management Co., which pioneered the money market mutual fund nearly four decades ago.
The company is facing several lawsuits after it said in September that its Reserve Primary Fund “broke the buck”—meaning its underlying assets fell below $1 for each investor dollar put in—after its value fell sharply because of soured investments in Lehman Brothers Holdings Inc.
It was the first such investor exposure to money-market losses since 1994. The fund is in the process of liquidating.
Joseph said the fund has failed to live up to its promise to redeem investments at $1 per share to the Colorado Surplus Asset Fund Trust, also known as CSAFE. Joseph alleges in the complaint that CSAFE requested redemption of all its shares on Sept. 15, 2008. Joseph said CSAFE invested more than $525 million in public money in the Primary Fund in September 2007.
Calls to Reserve Management media representatives were not immediately returned after hours Tuesday.
The Securities and Exchange Commission is planning to charge the company and its management with violations of securities laws. The company said in December they plan to cooperate with the SEC but that they will defend themselves vigorously.
