Pennsylvania regulators filed a civil complaint against broker-dealer TD Ameritrade, alleging it committed fraud in the sale of Reserve Yield Plus Fund.
The Pennsylvania Securities Commission’s enforcement division alleges that TD Ameritrade and Amerivest Investment Management LLC repeatedly told investors, in calls that were recorded, that the fund was a money-market fund. It actually was a cash-enhanced mutual fund with more risks than a money-market fund, the June 17 complaint said. Both TD Ameritrade and Amerivest Investment Management are subsidiaries of TD Ameritrade Holding Corp.
TD Ameritrade said it is “cooperating with any investigation or request.”
.According to the complaint, TD Ameritrade and Amerivest continued to sell the fund even after senior management at TD Ameritrade determined around November 2007 that the fund’s net asset value might dip below the $1-a-share level that money-market funds strive to maintain, known as “breaking the buck.”
A TD Ameritrade spokeswoman said the firm is “cooperating with any investigation or request.” She said Reserve Yield Plus Fund has distributed about 95% of its assets to investors. She declined to comment further.
The fund, which once held $1.2 billion in assets, was frozen just after the bigger Reserve Primary Fund told investors it was unable to redeem their money. That news, amid the financial crisis in September 2008, sent shock waves through the money-fund industry.
About $39.7 million remains in Yield Plus fund, most of it set aside by the fund’s trustees to cover potential claims and fees.