In the wake of the announcement that the value of the original money market mutual fund, The Primary Fund, had dropped below $1 per share, primarily due to debt written off in the face of the Lehman Brothers collapse, TD Ameritrade has pledged up to $50 million to mitigate client losses.
“We have a history of always striving to do the right thing for our advisor clients and their clients and I think this just goes hand in hand with that,” said Tom Bradley, president of TD Ameritrade Institutional in explaining the move. “It’s also about fighting to make sure that our clients’ money is safe and secure and to get them the dollar that we think they deserve. It’s very difficult for them, for the multiple advisors out there, to fight and we think that we can have a stronger impact to fight to make sure that they get their dollar, and that’s what we intend to do.”
Bradley explained that the company believes that in an orderly liquidation, which the SEC is attempting to accomplish, the shares will be worth $0.97 each and that $50 million would cover the $0.03 loss for TD Ameritrade’s clients. At this point although the SEC has granted the Primary Fund an extension beyond the original seven-day redemption delay, Bradley remained confident that the NAV would be $0.97/share when the liquidation ultimately begins. Should the value drop below that point, TD Ameritrade “would revisit the whole situation.”
“We’re trying to get more information about how this came about,” Bradley continued. “There are a lot of questions out there, such as what kind of information was made available, to whom, and when–for example there were quite a few redemptions that came in on Monday (September 15) before the announcement on Tuesday. We are working aggressively to find out what happened and in the end to fight to make sure that our clients get a dollar.”
Bradley also noted the opportunities available to advisors during such disruption. “There’s obviously quite a bit of turmoil and people are scared, and I think that investors will be looking for high quality trustworthy solutions. Independent fiduciary registered investment advisors are in the best position to provide unbiased advice and I think that in the end that will be to their advantage.”