TD Ameritrade Inc. agreed to pay $10 million in restitution to settle SEC charges it failed to reasonably supervise its RR's, some of whom misled customers when selling shares of the Reserve Yield Plus Fund, a mutual fund that "broke the buck" in September 2008.  Payment or distribution must be made within the next 30 days.  Eligible customers who continue to hold such shares will receive $0.012 per share of the fund. 

Under the settlement, TD Ameritrade also must provide notice of the terms of the SEC's order to all eligible customers and display information concerning the terms of the order on the firm's Web site.

    Where TD Ameritrade and its RR's Went Wrong.   According to the SEC's order, TD Ameritrade reps offered and sold the fund through the firm's various sales channels prior to 9/16/08.  A number of the reps, however, violated the securities laws by mischaracterizing the fund as a money market fund, as safe as cash, or as an investment with guaranteed liquidity.  They also failed to disclose the nature or risks of the fund at the time the investment was offered to customers. TD Ameritrade, for its part, allegedly failed to establish the pols and procedures necessary to reasonably supervise its employees and prevent these misrepresentations to investors.

The SEC administrative order finds that the Reserve Yield Plus Fund sought to provide higher returns than a money market fund while seeking to maintain a net asset value (NAV) of $1.00.  The fund's NAV fell to 97 cents on 9/16/09 after the fund manager wrote down the fund's investments in commercial paper issued by Lehman Brothers Holdings Inc. 

The SEC claims that thousands of TD Ameritrade customers continue to hold a majority of the fund's shares - they've received about 95% of their original principal investments in the fund, following distribution of most of the fund's liquidated assets to all of its shareholders.

    SEC Staff Credits.   The investigation was conducted by Richard Bayus II, Noel Franklin and Laura Metcalfe of the Denver Regional Office, in coordination with an examination of the firm by Denise Saxon and Lonnie Morgan (of the Denver office) and Matthew Jenkins of (Salt Lake Regional Office).

For further details, go to:   [SEC PR 11-36, 2/3]