Regulators Charge TD Ameritrade and Amerivest Investment Management with Fraud


Pennsylvania regulators have charged TD Ameritrade with fraud in selling its Reserve Yield Plus Fund, according to an August 4, 2010 Wall Street Journal article by Daisy Maxey, “TD Ameritrade Faces Civil Fraud Complaint Over Reserve Fund.” The Reserve Yield Plus lost money in the midst of the financial crisis in September 2008.

TD Ameritrade and its affiliate Amerivest Investment Management LLC consistently told investors, in recorded calls, that the Reserve Yield Plus Fund was a money-market fund when it was not. In actual fact, it was a “cash-enhanced” mutual fund with more risks than a money-market fund, according to the Pennsylvania complaint.

The firms persisted in selling the Reserve Fund after senior management determined (in November 2007) that the fund might “break the buck” ? i.e., drop below $1.00 per share, a deadly sin for a supposed money market fund, which would be expected to lead to a “run on the fund,” in which investors demand their money back all at once.

If the Pennsylvania regulators were wrong, one might expect that TD would quickly explain its position. But TD Ameritrade is apparently not talking. According to the article, a TD Ameritrade spokeswoman issued a curious statement about “cooperating with any investigation or request,” despite the fact the investigation is over and an enforcement action has been filed. TD Ameritrade has reportedly asked for and received an extension to file its answer to the enforcement action.
The Reserve Yield Plus Fund once held $1.2 billion in assets. About $39.7 million remains in the fund. Most of the remaining assets have been set aside to cover potential claims and fees, according to the article.

In December 2006, TD Ameritrade offered the Reserve Yield Plus Fund to money market fund investors whom it believed might leave to seek higher returns. But TD Ameritrade misrepresented and failed to disclose the true nature and risks associated with the fund, and thereby “committed dishonest or unethical business practices,” which constitutes a ground to suspend or revoke its registration, according to the article.

“We expect to receive inquiries from investors who acquired the Reserve Yield Plus Fund as a result of TD Ameritrade’s misrepresentation of it as a money market fund,” said J. Boyd Page, a senior partner at Page Perry in Atlanta. “Our legal team will investigate and pursue investor arbitrations on behalf of investors who purchased the Reserve Yield Plus Fund,” he added.?? The brokers who sold the Reserve Yield Plus Fund will not be targets of investor claims.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys have extensive experience in representing conservative investors who were misled by untrue claims that an investment was a money market or cash-equivalent investment. For further information, please contact us.