Money market pioneer Bruce Bent was cleared on Monday of civil fraud charges that he misled investors in the early days of the 2008 financial meltdown, a blow to U.S. regulators in one of the few cases accusing individuals on Wall Street of wrongdoing during the crisis.
A jury rejected all of the charges against Bent following a month-long trial in U.S. District Court in Manhattan. His son, Bruce Bent II, was also cleared of violating civil securities laws but was found liable on one negligence claim. Two entities tied to the Bents were found liable on some charges.
The U.S. Securities and Exchange Commission accused the Bents of lying to investors and fund trustees in attempts to stop a run on their Reserve Fund in September 2008. That was when financial markets were roiled in the wake of the bankruptcy of Lehman Brothers.
The SEC sought civil penalties from the defendants.
The fund "broke the buck" - an almost unheard-of event for money market funds -- when its net asset value fell below $1 a share.
The jury found that two of the Bents' companies, Reserve Management Co Inc and Resrv Partners Inc, had violated some securities laws. But in losing the case against the elder Bent, the SEC failed to get jurors to hold a major financial figure liable.
"Today's verdict of liability sends the message that fund executives cannot withhold from investors and trustees key information about their fund's vulnerability," Robert Khuzami, the commission's director of enforcement, said in a statement.
Mark Arena, a spokesman for the Bent family, said they were "gratified" by the verdict, but that they may appeal some of the jury's findings.
During the trial, a lawyer for the Bents argued that the men were acting in good faith and said the fund had fallen victim to the economic maelstrom of September 2008. Both of the Bents testified at the trial.
The case is SEC v. Reserve Management Co et al, U.S. District Court, Southern District of New York, No. 09-cv-04346.
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