Ameriprise Suit Alleges Reserve Primary Fund Tipped Off Big Investors

The Reserve left retail investors out in the cold, Ameriprise says.

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More on the Reserve Primary Fund saga: Financial-services company Ameriprise Financial is suing Reserve Management Co., alleging it selectively tipped off big institutional investors about the troubled fund—leaving small investors in the cold. More specifically, the suit alleges that on the morning Lehman Bros. filed for bankruptcy—September 15—Reserve's agents notified a number of big-time investors that the fund held material exposure to the securities issued by Lehman and that the fund was at risk of "breaking the buck." Ameriprise says it filed the suit to "protect the interest of its retail investor clients." Clients of the company and its subsidiary, Securities America, hold more than 300,000 accounts in the Reserve Primary Fund.

Other brokerages that swept client money into the Reserve Primary include TD Ameritrade. Last week, an analyst with Friedman, Billings, Ramsey & Co. estimated that the Reserve's decision to cut the value of its shares could cost TD Ameritrade's customers as much as $100 million.