This is a securities class action against Reserve Short-Term Investment Trust; various related entities; and T.D. Ameritrade.
The Reserve Short-Term Investment Trust is an open-end, diversified management investment company designed to "seek as high a level of current income as is consistent with the preservation of capital and liquidity" and a "stable $1.00 share price."
The Reserve Short-Term Investment for example issued reports characterizing the Reserve Short-Term Investment as being an "enhanced cash fund" and emphasizing the Reserve Short-Term Investment's focus on "safety of principal, liquidity and soundness of sleep." Although not a money marker fund, the Reserve Short-Term's purchasers were sold their interests in the Fund by TD Ameritrade and its employees who consistently represented to investors that the Fund was just like a money market fund.
On September 16, 2008, The Reserve Fund, an entity related to the Reserve Short-Term Trust, issued a release concerning the Primary Fund, one of its money market funds, stating that the value of the debt securities issued by Lehman Brothers Holdings, Inc. (face value $785 million) and held by the Primary Fund had been valued at zero and, as a result, the net asset value ("NAV") of the Primary Fund was $0.97 per share. This was major news, as this was only the second time in history that a money market fund had "broken the buck", that is, reported a share's value was less than a dollar.
In addition, on September 16, 2008, the NAV of the Reserve Yield Plus Fund also collapsed from $1.00 per share to close at $0.97 due to its investment in debt securities issued by Lehman. Thereafter, the Reserve Short-Term Trust suspended providing a daily NAV on the Reserve Yield Plus Fund.
According to the complaint, the true facts, which were omitted from the Prospectus and other statements made by defendants during the Class Period, were as follows:
(a) the Reserve Short-Term Investment was no longer adhering to the stated objectives of preserving capital, but in an effort to achieve greater yields was pursuing riskier instruments;
(b) despite the fact that many observers believed Lehman would be the next Wall Street failure after Bear Stearns collapsed in March 2008, the Reserve Short-Term Investment purchased a large amount of Lehman commercial paper in April 2008;
(c) the Reserve Short-Term Investment was not designed to protect the $1.00 NAV, as were traditional money market funds, and was thus significantly riskier than money market funds;
(d) the Reserve Short-Term Investment's internal controls were inadequate to prevent defendants from taking on excessive risk; and
(e) the Reserve Short-Term Investment failed to disclose the extent of its relationship with TD Ameritrade.
Name (Stock Symbol)
Reserve Short-Term Investment Trust
Reserve Short-Term Investment Trust is an investment management company.
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