The federal government has lost another high-profile case resulting from the global financial crisis.
A federal jury Monday cleared the managers of the Reserve Fund money-market fund of civil fraud charges, according to news reports.
The SEC claimed a partial victory.
"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 agency's enforcement director, said in a statement. "This case, along with our actions against more than 100 other entities and individuals, demonstrates our continuing commitment to pursuing cases arising out of the financial crisis."
The fund fell below $1 per share -- it broke the buck, in Wall Street vernacular -- after the bankruptcy of Lehman Bros. at the height of the crisis in September 2008 left the fund's Lehman holdings worthless.
The surprise loss in the bellwether Reserve Fund forced the federal government to extend a form of deposit insurance to investors of all money-market funds. The SEC worried that the Reserve Fund loss would lead to a run on the industry by shattering the confidence of small investors who view money funds as super-safe investments.
The loss is another notable setback for the federal government in its effort to crack down on crisis-era abuses. Federal prosecutors in 2009 lost a criminal case against a pair of Bear Stearns hedge-fund managers.