The Massachusetts Securities Division on January 13 charged Reserve Management Company with making numerous false and misleading statements to investors in attempts to dissuade them from redeeming shares in the company’s Primary Fund, which “broke the buck” a day after Lehman Brothers filed for bankruptcy.

According to the complaint, Reserve’s Primary Fund held Lehman paper, which comprised 1.2% of the Primary Fund’s holdings as of September 15, 2008. That same morning, anxious investors flooded Reserve Management with inquiries about the potential impact of its Lehman holdings on the NAV of the Primary Fund, the complaint says. To calm investors, sales personnel of Reserve Management, at the direction of senior management, made statements and distributed materials that “contained outright falsities which the principals of Reserve Management knew at the time were not true,” the compliant states.

The complaint states that Reserve falsely told investors that Reserve Management would support the NAV of the Primary Fund “to whatever degree is required” and that Reserve Management was entering into a capital support agreement to support the NAV of the Primary Fund and that the paperwork for the capital support agreement had been submitted to the SEC and was awaiting final sign-off. Reserve also falsely stated that Reserve Management (and the trustees of the Primary Fund) were still valuing the Lehman paper held in the Primary Fund at par, even after they had decided to value it at below par, the complaint states. Finally, Reserve Management stated that the reason the redemptions were not occurring was due to an operations issue at State Street (Reserve Management’s custodial bank), not because of any liquidity issues with respect to Reserve itself, the complaunt says.

The complaint was filed against Reserve Management Company, Reserve Funds Trust, Reserve Partners, Inc., and Bruce Bent II, son of the Reserve’s founder and chairman, Bruce R. Bent.