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TD Ameritrade Holding Corporation Message Board

  • lowriskincome lowriskincome Sep 21, 2008 7:24 PM Flag

    Maybe Ameritrade will reimburse clients for Reserve losses

    Per this report it would only cost Ameritrade .03 to .07 cents per share (EPS) to make all Reserve holders whole:

    A Money Fund Breaks The Buck
    $815b of Money Market AUM Gets A Clean Bill Of Health

    * BLK, LM, SCHW, & FII confirmed that their money funds have no Lehman
    exposure. These four firms manage $815b in money funds as of 7/31/08.

    * The Reserve's Primary Fund became only the 2nd money market fund to ever
    "break the buck" (i.e. have a NAV of less than $1). The Primary Fund's NAV
    fell below $1 to 97 cents (or down 3%) driven by losses on Lehman's
    commercial paper and mid-term notes.
    * We estimate that TD Ameritrade could incur a charge of less than $0.05 EPS
    related to client exposure in The Reserve's Primary Money Market Fund. While
    TD Ameritrade does not disclose the amount of client assets invested in this
    fund, we estimate total exposure is in the $1b to $2b range (about 0.3% of
    total client assets). We estimate that assets in all The Reserve funds came
    primarily from legacy Ameritrade clients who had ~$3.4b in money market funds
    around the time of the TD merger. Additionally, we believe most clients with
    under $100k in cash were recently swept out of The Reserve funds, which leads
    us to believe the amount still invested in The Reserve's Primary Fund is
    significantly less than the original $3.4b. In the figure below, we estimate
    the EPS impact would be $0.03-$0.07, if TD Ameritrade opts to reimburse
    clients for losses in The Reserve's Primary Fund (which we view as likely).

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    • Not clear if Reserve will be included given that losses were incurred PRIOR to the January 19th effective date of the new federal insurance. Lets hope Reserve will be covered retroactively.

      http://www.treasury.gov/press/releases/hp1151.htm

      Treasury Provides Further Clarity For Guaranty Program for Money Market Funds

      Washington – The U.S. Treasury Department is continuing to develop the specific details surrounding the temporary guaranty program for money market funds that was announced on September 19, 2008.


      While these details are being finalized, Treasury is making the following clarifications:

      1. All money market mutual funds that are regulated under Rule 2a-7 of the Investment Company Act of 1940 and are publicly offered and registered with the Securities and Exchange Commission will be eligible to participate in the program.

      2. Eligible funds include both taxable and tax-exempt money market funds. The Treasury and the IRS intend to issue guidance that will confirm that participation in the temporary guaranty program will not be treated as a federal guaranty that jeopardizes the tax-exempt treatment of payments by tax-exempt money market funds.

      3. The temporary guaranty program will be designed to provide coverage to shareholders for amounts held by them in such funds as of the close of business on September 19, 2008.

      4. Further details on other aspects of the temporary guaranty program and the required documentation for funds to participate will be provided in the coming days.



      -30-
      ty

    • Not clear if Reserve will be included given that losses were incurred PRIOR to the January 19th effective date of the new federal insurance. Lets hope Reserve will be covered retroactively.

      Treasury Provides Further Clarity For Guaranty Program for Money Market Funds

      Washington – The U.S. Treasury Department is continuing to develop the specific details surrounding the temporary guaranty program for money market funds that was announced on September 19, 2008.


      While these details are being finalized, Treasury is making the following clarifications:

      1. All money market mutual funds that are regulated under Rule 2a-7 of the Investment Company Act of 1940 and are publicly offered and registered with the Securities and Exchange Commission will be eligible to participate in the program.

      2. Eligible funds include both taxable and tax-exempt money market funds. The Treasury and the IRS intend to issue guidance that will confirm that participation in the temporary guaranty program will not be treated as a federal guaranty that jeopardizes the tax-exempt treatment of payments by tax-exempt money market funds.

      3. The temporary guaranty program will be designed to provide coverage to shareholders for amounts held by them in such funds as of the close of business on September 19, 2008.

      4. Further details on other aspects of the temporary guaranty program and the required documentation for funds to participate will be provided in the coming days.



      -30-
      ty

    • Do you have a link for this "report" describing the hit to AMTD's EPS should they backstop their Reserve Fund clients?

      I filed my complaint with the SEC on Sunday afternoon. If interested, I can post it on this board & Email it to the WSJ reporter. My calculations, based on the May 31st annual report, show that had the Reserve Primary Fund simply shut down Monday morning (9/15/1008), the hit to ALL shareholders would have been 1.2% provided the fund could have liquidated in an orderly manner.

      Also, someone mentioned we should Email Jennifer @ the Treasury Dept. Does anyone have her Email addy?

      Thanks,
      RB
      (awaiting my 6,500 free trades)

 
AMTD
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