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Ameriprise, TD Ameritrade Move to Protect Clients

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Ameriprise Financial is committing up to $33 million to protect clients who have invested in the Primary Fund, a money market mutual fund managed by Reserve Management Co., which is an independent mutual fund company based in New York. Reserve reported a net asset value (NAV) for the Primary Fund of $0.97 per share on September 16.

Ameriprise Financial will provide up to $33 million of its own capital to mitigate client losses up to 3 cents per share should clients receive less than $1.00 per share when the fund is liquidated. Ameriprise Financial says it is taking this step in recognition of the unprecedented nature of this event and the prospect that this situation will not be covered by the proposed U.S. Treasury money market guarantee program.

The Primary Fund became the first major money market mutual fund ever to “break the buck,” or record a NAV below $1.00 per share, on September 16. Since then, assets held by individual investors across the nation — including many clients of Ameriprise Financial — have been inaccessible.

“The unprecedented situation with the Reserve has caused significant anxiety and hardship for individual investors,” says chairman and CEO Jim Cracchiolo. “Ameriprise Financial has taken a number of extraordinary actions on our clients’ behalf. With this additional action, we are addressing losses incurred through an investment option that has for decades provided an unquestioned safe haven for consumers’ cash.

Ameriprise Financial expects this commitment to have an impact of roughly 10 cents per share on its third-quarter earnings.

For its part TD Ameritrade Holding Corporation says it too has stepped in to help protect its clients’ positions held in the Primary Fund. TD Ameritrade has explained that it believes that the Primary Fund’s net asset value (NAV) upon an orderly liquidation will be $0.97 per share and that clients receiving less than $1.00 per share of the fund upon liquidation, will be mitigated by $0.03 per share of the fund, representing some $50 million.

TD Ameritrade explains that it issued a redemption request for its clients’ assets invested in the Primary Fund following the Reserve’s public disclosure on September 16 that the fund’s NAV had dropped below $1.00 to $0.97 per share.

“While these are unprecedented times for the nation’s financial markets, we believe that TD Ameritrade clients can have confidence in the fact that their investment firm has their best interests at heart,” says Fred Tomczyk, president and chief operating officer. “In the absence of action by the Reserve and the Treasury Department, we are stepping in to help our clients because it’s the right thing to do. We will continue to strongly advocate for the average American family to ensure their financial interests are at the forefront of any policy-making process or action.”

The company expects that its financial commitment could have a one-time impact of $50 million, or $0.05 per diluted share on its fourth fiscal quarter.

“Our strong financial position gives us the flexibility to step in, make these decisions and do the right thing for our clients, our shareholders and our associates,” Tomczyk concludes.

Janet Levaux, MBA/MA, is the managing editor of Research; reach her at [email protected]