The Securities and Exchange Commission has filed fraud charges against the Reserve Primary Fund and its officers for failing to disclose the fund’s vulnerability to Lehman Brothers, as it filed for bankruptcy, instead falsely assuring investors that it would support the fund’s $1 net asset value.

Further, the SEC said, the investment advisor significantly understated the volume of redemption requests and failed to provide the trustees with accurate information concerning the value of Lehman securities.

In bringing the charges, the SEC is working to expedite a pro rata distribution of the fund’s remaining assets to investors.

“We’re taking the lead in this matter because we want to get money back into the pockets of the investors as quickly as possible,” said SEC Chairman Mary L. Schapiro. “Through this action, we hope to avoid inconsistent rulings regarding a finite pool of money and assure a fair result.”

The SEC is charging Reserve Management Co., its Chairman Bruce Bent, Sr., and Vice Chairman and President Bruce Bent II with failing to present key material information to investors, the fund’s board of trustees and ratings agencies as Lehman filed for bankruptcy on Sept. 15.

“The fund’s managers turned a blind eye to investors and the reality of the situation at hand before the fund broke the buck” on Sept. 15, Schapiro said.

“Fund managers have serious obligations to keep their trustees and investors informed in both good times and bad, and cannot choose to reveal only favorable facts,” added James A. Clarkson, acting director of the SEC’s New York regional office.

The complaint, filed in the U.S. District Court for the Southern District of New York, seeks a final judgment that will order defendants to pay financial penalties and disgorgement of ill-gotten gains, plus interest.

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