|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Embattled, Fund Shifts Cost of Suits to Investors
Diana B. Henriques
N.Y. Times. December 5, 2008
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EXCERPT: The Reserve Primary Fund has presented its deeply frustrated shareholders with a stark choice. If they are patient, they might ultimately get back 98.5 cents for each dollar they had in the money market fund, which in September became only the second such fund to ever “break the buck,” or report a share price below a dollar.
But if they continue to wage legal battles against the fund and its managers, the company will use investors’ own money to defend itself against their accusations of mismanagement and deception. So this money fund once seen as risk-free has presented investors with a painful dilemma: if they fight for more than 98.5 cents, they risk getting far less, because more of their money will be used to pay the fund’s legal expenses. Those terms, described in a “plan of liquidation” posted on the Reserve Fund’s Web site late Wednesday, are part of the contract that fund trustees negotiated with the money manager that has been running the fund since its inception more than 30 years ago. Even so, the choice struck some legal experts as brazen. “This is a very smart thing they have done,” said Tamar Frankel, a law professor at Boston University who has written extensively on mutual fund legal issues. “It pours not only ice water but ice on any claims” by shareholders, she added. But if the fund’s manager or trustees are to blame for the fund’s current troubles, Ms. Frankel said, she is very skeptical that they will be allowed to tap shareholder money for the legal bills. The fund’s shareholders can avoid paying those legal bills only if the trustees or the fund adviser have committed willful malfeasance, acted in bad faith, displayed gross negligence or shown a reckless disregard for their duties. |
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