The father and son managers of a money market fund that ‘broke the buck’ at the height of the 2008 financial crisis have reached a $10 million settlement in a class-action lawsuit filed by fund investors.
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The settlement, filed late Friday in federal court in New York, requires fund managers Bruce Bent Sr. and his sons Bruce Bent II and Arthur Bent III to return the settlement money to investors in the Reserve Primary Fund, whose value slipped below $1 a share in September 2008 shortly after investment bank Lehman Brothers filed for bankruptcy.
The $62 billion Reserve Primary Fund was heavily invested in debt issued by Lehman.
Investors argued in their class action lawsuit that the Bents as managers of the fund failed to act quickly enough in the wake of Lehman’s collapse and misled investors about their efforts to avoid breaking the buck, an extremely rare occurrence in the staid world of money market funds.
The Bent’s also agreed to give up $42 million of their $72 million in claims for legal and other expenses against the fund as part of the settlement. The Bent’s have not admitted to any wrongdoing.
A jury last November acquitted Bruce Bent Sr. and Bruce Bent II of civil fraud charges brought by the Securities and Exchange Commission. Bent II was found negligent by the jury.
Bent Sr. is known as the father of the money market mutual fund, founding the Reserve Primary Fund in 1970 as a safe investment vehicle.
After the Reserve Primary Fund broke the buck on Sept. 16, 2008, a day after Lehman filed for bankruptcy, fears spread through the banking system that other funds would follow, leading the government to offer to backstop the money market industry. The fears were unfounded.