November 3, 1994
TO: MONEY MARKET FUNDS AD HOC COMMITTEE NO. 19-94
SEC RULES MEMBERS NO. 80-94
RE: COMPLAINT FILED AGAINST MONEY MARKET FUND AND AFFILIATED
PARTIES
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A complaint was filed in the U.S. District Court for Central
District of California by several shareholders against a money
market fund that recently announced plans to liquidate and certain
of its affiliated parties. Among other things, the plaintiffs, who
have been advised that they will receive less than $1 per share
from the fund's liquidation, allege that certain shareholders had
"inside" information regarding the financial condition of the fund
and, therefore, were able to avoid any potential losses by
redeeming their shares before the information became public and the
fund announced plans to liquidate.
The plaintiffs also allege that the fund's prospectus was
misleading in that, among other things, it stated that the fund
invests in safe, sound government-backed obligations only and did
not disclose that the fund would invest in structured notes, "an
investment vehicle known to be risky and an investment which is
deemed by the SEC to be inappropriate for money market funds."
A copy of the complaint is attached.
Amy B.R. Lancellotta
Associate Counsel
Attachments