The financial crisis is slowly becoming only a memory in the minds of many on Wall Street, but the fallout continues to trickle in on a day-to-day basis. The latest shareholder settlement is one of the largest yet.
Bruce R. Bent II, president of the Reserve Primary market-money fund that failed during the financial crisis, agreed to settle a shareholder lawsuit worth about $54.9 million yesterday. The fund was worth $62.5 billion at the time of its collapse.
According to Bloomberg, Bent and his father are among the defendants that have agreed to pay $10 million in cash, withdraw their claim for $42.4 million from a court-funded expense fund and allow $2.5 million of that expense fund cash to go to shareholders. However, as a term of the settlement, none of the defendants claim any wrongdoing.
Back in 2010, the shareholders attempted to take Bent to a jury trial. The closest they ever got, however, was when a federal jury found Bent negligent on one count of violating securities law. The jury absolved his father of all wrongdoing.
The Reserve Primary fund originally held $785 million in Lehman Brothers Holdings Inc. debt. Its failure was triggered when, according to Bloomberg, it “broke the buck” by failing to maintain a $1-a-share net asset value. Shareholders filed suit against the fund in September 2008, two days after Lehman went bankrupt.
The fund’s closure resulted in global credit markets freezing, as investors scrambled to sell holdings to meet redemptions. The situation only became calm once again when the U.S. Treasury guaranteed money-fund shareholders against default for one year.
The SEC has been busy already in September. For more InsideCounsel stories dealing with the commission, read on: