Bruce Bent, founder of the first money market fund, was cleared of fraud charges Monday after the Securities and Exchange Commission alleged that he deceived investors leading up to the Primary Reserve Fund “breaking the buck.”
While the jury rejected the charges against Bent in what turned out to be a monthlong trial in U.S. District Court in Manhattan, the jury did find Reserve Management Co. and Resrv Partners Inc. liable of fraud and Bruce Bent II liable for negligence.
The SEC alleged in its 2009 complaint that the Reserve Management (RMCI), its chairman, Bruce Bent Sr., its vice chairman and president, Bruce Bent II, and Resrv Partners failed to provide key material information to investors, the fund’s board of trustees, and rating agencies as Lehman Brothers filed for bankruptcy protection on Sept. 15.
SEC Chairwoman Mary Schapiro noted at the time the complaint was filed that: “As we alleged in our complaint, the fund’s managers turned a blind eye to investors and the reality of the situation at hand before the fund broke the buck last September.”
The Reserve Fund, which held $785 million in Lehman-issued securities, became illiquid on Sept. 15 when the fund was unable to meet investor requests for redemptions.