Compliance August 27, 2009

Judge Consolidates Reserve Primary Fund Lawsuits

A federal judge on Wednesday combined 12 lawsuits over the failed Reserve Primary Fund, Reuters reported.

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U.S. District Judge Paul Gardephe named Third Avenue Institutional International Value Fund LP, part of the Third Avenue fund family overseen by value investor Martin Whitman, lead plaintiff, according to Reuters. Gardephe said the Third Avenue fund’s financial stake in the case “dwarfs” that of any other proposed lead plaintiff.

The lawsuits sprang up after the Reserve Primary Fund, once worth $62 billion, announced it “broke the buck” following Lehman Brothers Holdings Inc’s bankruptcy (see “Lawsuits Spring up from Lehman Brothers Fall ”). The fund held about $785 million of Lehman debt when the bank filed for bankruptcy protection, triggering a shareholder run on the fund. The Reserve Fund announced publicly its Lehman-related holdings the afternoon of September 16, 2008, along with news its net asset value had slipped to $0.97 cents.

The fund paid investors one-third of their assets last October (see “Reserve Primary Fund Promises $20B in Shareholder Repayments”), and according to Reuters, on Tuesday, Reserve Primary said each unpaid investor in the fund could receive as much as 99 cents on the dollar, up from the 98.5 cents it had previously projected.

The news report said Gardephe ruled that because Reserve Primary has already distributed more than 85% of its assets, it would create “waste” and reduce shareholder recoveries to allow multiple lawsuits.

The Securities and Exchange Commission’s (SEC) Division of Enforcement has charged the two top executives of the Reserve Management Co. money-market fund with fraudulently keeping secret the true financial situation of their Primary Fund after Lehman Brothers filed for bankruptcy (see “Reserve Management Execs Accused of Fraud in Money Fund Debacle”). In June, the SEC asked a federal judge to block some investor lawsuits against the Reserve Primary Fund to ensure all shareholders get as much money as possible (see “SEC Will Move to Block Reserve Fund Suits”).

The consolidated case is In re The Reserve Primary Fund Securities & Derivative Class Action Litigation, U.S. District Court, Southern District of New York (Manhattan), No. 08-8060.

Data & Research August 27, 2009

Saving for Future Remains Top Concern for Workers

When asked what most concerns them in the long-term future, two in five (41%) surveyed workers expressed concern over saving for retirement, their child's education, or other large, future expenses.

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Other financial concerns cited include worrying about how their family will be cared for (19%), paying bills (14%), their health (12%), losing their job (7%), or a lack of job mobility (4%), according to a survey from job Web site SnagAJob.com.

Mirroring last year’s findings, the economy still is considered by most (56%) to be the number one issue facing America today, followed by health care (15%), immigration (6%), the war (6%), the environment (5%), terrorism (5%), and the housing market (3%), according to the  SnagAJob.com Labor Happiness Index.

Most survey respondents (56%) believe that the economic climate has stabilized but not yet begun to improve, but more than a third of workers (36%) fear that the worst is yet to come. Only 4% think the economy has turned the corner.

The index found that more than half (58%) of workers said they are happy on the job. That is 7% fewer than the number who reported being happy on the job in 2008.

However, SnagAJob.com said, in a climate where many have lost their jobs, only one in four (24%) respondents said their happiness is based on the fact they are employed, while 41% indicated they are happy that their jobs give them personal satisfaction or suit their lifestyle.

The survey was conducted by Ipsos Public Affairs among more than 1,000 salaried and hourly employees across the U.S.

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