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Spotlight On: Information for Reserve Primary Fund Investors

Jan. 1, 2010

Note: This page has been archived and is no longer being updated. It may include obsolete or out-of-date information.

UPDATE: Judge Gardephe issued an Opinion and Order on Nov. 25, 2009 that impact investors in the Reserve Primary Fund.
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Court’s Dec. 11 Order Clarifying Nov. 25 Order
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Court’s Jan. 26, 2010, Order Regarding ‘Straddler’ Investors

The SEC charged several entities and individuals who operate the Reserve Primary Fund in an enforcement action on May 5, 2009, and is seeking to return the fund's remaining assets to investors expeditiously on a pro rata basis.

The Reserve Primary Fund "broke the buck" last September when its net asset value fell below $1 per share. Since then, the fund has withheld a significant amount of money from investors pending the outcome of numerous lawsuits filed against the fund, its trustees, and other officers and directors of the Reserve entities.

Court Action

The Honorable Judge Paul G. Gardephe of the U.S. District Court for the Southern District of New York issued an order on June 8, 2009, requiring:

  • "all claimants against the assets of the Primary Fund, the Defendants, or any of their respective officers, directors, trustees, representatives, agents or employees, shall file any objections to the entry of the relief sought by the Commission" by July 22, 2009.
  • The Commission and The Reserve Primary Fund shall file any responses to those objections by August 21, 2009.
  • The court "will hold a hearing on the Commission's Application for Injunctive and Other Relief and Approval of Proposed Plan of Distribution at 9:30 a.m. on September 23, 2009."

Documents Filed by the SEC on August 21, 2009

On August 21, 2009, the SEC filed a Memorandum of Law in Response to Objections to its Application for Injunctive and Other Relief and Approval of the Commission’s Proposed Plan of Distribution. The SEC’s Brief is available here, including an Appendix reflecting an Amended Plan clarifying the Term Sheet previously submitted by the SEC and attached as an Appendix to Judge Gardephe’s June 8, 2009 Order.

The SEC also filed a sworn declaration by SEC attorney Michael D. Birnbaum in support of its Application. The Birnbaum Declaration is the means by which the Commission transmitted to the Court those objections and other submissions that were sent to the SEC but not filed with the Court. Those submissions are available here.

SEC’s Proposed Distribution Plan

The SEC has filed with the court a Memorandum of Law that explains the need for its proposed plan for distribution of the fund's remaining assets to investors.

The SEC recognizes that a final order to distribute the remaining assets should only be entered after investors have an opportunity to be heard before the court, if they so choose, regarding the SEC’s proposed plan.

The SEC's proposed plan for distribution is available here, as the Appendix to Judge Gardephe's order.

Investors also can review some of the SEC's evidence in support of its proposed distribution plan.

A declaration by SEC attorney Michael J. Osnato is a sworn statement in support of the SEC's claims made in its Memorandum of Law.

The Osnato Declaration is the means by which certain exhibits - both documents and audio files - have been presented to the court and other litigants. These exhibits are linked below.

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