Treasury Opens Money Fund Guarantee Program
The Department of the Treasury opened its money market mutual fund guarantee program Monday and provided details on how the $50 billion program, designed to stem a run on the $3.4 trillion money market fund industry, will work.
The guarantee program will apply to both taxable and non-taxable money market fund assets as of close of business on Sept. 19 and cover funds that are registered with the Securities and Exchange Commission, regulated under Rule 2a-7 and seek to maintain a $1 net asset value.
Although the Treasury initially said the program would be open for a full year, it now says it will be in effect for an initial three-month term, after which time Secretary of the Treasury Henry Paulson will review the need and terms for the program. Funds have until Oct. 8 to sign up at: treas.gov/offices/domestic-finance/key-initiatives/money-market-fund.shtml.
The program protects the $1 net asset value per share of all money market fund investors as of the close of business on Sept. 19 if their fund breaks the buck, or falls below $0.995, as long as it signs up for the program. Funds will need to renew their participation in the program after the initial three-month trial period and any subsequent extension. It will only apply to holdings as of Sept. 19. Should an investor subsequently purchase additional shares at a later time, those additional shares will not be covered.
The Treasury Department said investors whose funds are participating in the program could expect to receive redemptions within 30 days and that investors need to contact their fund company individually to find out if they are participating in the program.
In order to participate in the program, funds must have had an NAV per share of at least $0.995 as of the close of business on Sept. 19. The fee to participate in the program will be 1.5 basis points for funds with NAVs between $0.995 and $0.997 and one basis point for funds with NAVs of $0.997 or greater.
The Treasury has directed fund companies that have questions about the program to send e-mails to: moneymarketfundsguaranteeprogram@do.treas.gov.
Private Equity Firms Buy Neuberger for $2.15 Billion
Private equity firms Bain Capital Partners and Hellman & Friedman acquired Neuberger Berman Monday for $2.15 billion, with the two firms holding equal positions in Neuberger, the firm's portfolio managers given a "significant stake" and the deal expected to close early next year.
Joe Amato, head of Neuberger Berman, said: "The portfolio managers across equities, fixed income and alternatives are all energized by the opportunity to reinforce and enhance our already high standards of investment performance and client service, combined with the opportunity to re-establish a direct ownership basis in the business."
Amato will retain his position, but George Walker, formerly global head of investment management at Lehman Brothers, Neuberger's now-bankrupt parent company, will become chief executive of Neuberger Berman Investment Management, which will house its mutual funds, fixed income, commodities, wealth management, separately managed accounts, institutional and quantitative investing strategies, with a combined $230 billion of assets under management as of Aug. 31. Merchant banking, real estate, venture capital and private equity will not be part of Neuberger Berman Investment Management.
"We look forward to working with the portfolio managers and management team to grow the business globally and expand the array of products and services offered to clients," said Phil Loughlin, managing director at Bain.
Allen Thorpe, managing director of Hellman & Friedman, added: "This is a special firm. Each of its businesses-Neuberger Berman equity as well as the fixed income, quantitative and private funds investment groups-has a strong individual performance record. We have also been impressed by their proven ability to work together through first-rate client professionals to design and implement comprehensive solutions for large, sophisticated clients."
Evergreen Parent Wachovia To Purchase Lehman Debt
Evergreen Investments announced Tuesday that its parent, Wachovia Corp., will purchase Lehman Brothers debt held in three of its money market mutual funds: the Evergreen Money Market Fund, Evergreen Institutional Money Market Fund and Evergreen Prime Cash Management Fund.
FolioFN Offers Safety via Deposit-Spreading Account
FolioFN Investments has started offering a cash investment product that provides Federal Deposit Insurance Corp. protection for up to $2.3 million in individual accounts and up to $5.75 million in retirement accounts by spreading deposits over a network of 23 banks. The product is offered to retail and institutional clients.
The company's products, much like a personalized mutual fund or exchange traded fund, allow individual investors to buy diversified portfolios of securities.
Other companies, including Merrill Lynch, offer similar FDIC-protected investment products, and more companies are introducing such products in response to the recent financial crises.
PrimeVest Financial Services, an ING Group unit that provides investment products and services for banking companies, introduced a money market-like savings product for high-net-worth clients.
The FlexInsured Account allows clients with large cash balances to receive FDIC protection by sweeping assets into FDIC-insured money market accounts at multiple banks. Typically, the FDIC protects the first $100,000 of deposits in a bank account; more can be insured if assets are spread across multiple banks.
A day earlier, Evolve Bank and Trust in Memphis, Tenn., announced it is making the Deutsche Bank Insured Deposit Program available to its customers. The program gives money market deposit account holders FDIC coverage of up to $3 million for individual accounts and $6 million for joint accounts.
Canadian Regulators Review Money Funds
Canadian securities regulators have begun on-site reviews of money market funds, fearing their exposure to devalued securities. The Canadian Securities Administrators, which consists of the securities commissions for the country's various provinces, and the Investment Industry Regulatory Organization of Canada, are conducting the review.
"The CSA is actively engaged in an examination of the issues related to the current market events and will continue to take regulatory action, where appropriate, to protect investors and market integrity in these extraordinary times," said Jean St-Gelais, chairman of the CSA and head of the Quebec securities commission.
U.S. regulators have been monitoring money market funds to determine which funds are holding commercial paper of financial firms, and how much.
SEC Announces Ameriprise $32 Million Fair Fund
The Securities and Exchange Commission has created a nearly $32 million fair fund distribution to help current and former customers of Ameriprise Financial Services who were harmed by the company's failure to disclose revenue-sharing payments.
"This case demonstrates that regardless of the manner in which investors were harmed, we will do everything possible to return funds to them from wrongdoers," said Dick D'Anna, director of the SEC's Office of Collections and Distributions.
The SEC found in 2005 Ameriprise did not adequately disclose the receipt of millions of dollars in revenue-sharing payments from mutual fund companies for inclusion on Ameriprise's brokerage platform. Approximately 575,000 investors were affected.
The SEC ordered Ameriprise to pay $15 million in financial penalties and $15 million in disgorgement and prejudgment interest.
"This distribution marks another significant step in the Commission's program to return money to investors injured by improper mutual fund practices," said Merri Jo Gillette, regional director of the SEC's Chicago Regional Office.
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