Thursday, October 23, 2008

TD Ameritrate - Reserve Yield Plus Frozen

TD Ameritrade, which reports fourth-quarter results Oct. 23, also faces nervous investors.

The broker's decision to use its own money to prop up the Reserve Primary Fund is rippling through the rest of the sector as clients of other firms worry about money-market redemptions. Some brokers may take similar steps if clients' funds in outside money-market funds are threatened.

In the meantime, investors in Reserve Yield Plus, another money-market fund run by Reserve Management, have been unable to withdraw money due to solvency issues. TD Ameritrade customers hold a large portion of Yield Plus shares. And TD Ameritrade is yet to cover the losses in this fund as it did for the larger Primary Fund.

The company said in June that a rate cut would hurt profit. Shares fell 7% on Thursday after the Fed and six other world banks cut rates to encourage lending. For the moment, the Treasury Department's recent move to insure money-market funds is helping allay investor fears, says Zecco's Dalporto.

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