You had to see this one coming. Today Coughlin Stoia Geller Rudman & Robbins LLP, a law firm, announced that a class action has been submitted in New York on behalf of people or entities that bought and held shares of certain funds offered by the Reserve Short-Term Investment Trust, including RYPQX.  You can be included in the class action suit if you held shares between July 27, 2007 and September 16, 2008.

The complaint alleges that many of the Fund’s purchasers were sold their interests in the Fund by TD Ameritrade and its employees who consistently represented to investors that the Fund was just like a money market fund. Due to defendants’ positive, but false, statements, investors purchased and/or continued to hold shares in the Fund. -Source

Essentially, the argument is that representatives sold investors on the funds, and implied that the fund was secure, much like a money market fund.

Luckily, I was able to unload all my RYPQX holdings a few weeks before the fund was frozen in light of the Bear Stearns collapse.

I’m not sure I’ll participate in the class action suit.  Over the course of about 12 months, I held about 1000 units of RYPQX at any one time as a place to hold funds while waiting for opportunities.

Is it really worth my time to participate in a class action when I really didn’t have much skin in the game?  Probably not.

But if you do, go to the Coughlin Stoia website, or see the case information.

There is also a Yahoo! group dedicated to those who lost money RYPQX as a result of the fund “breaking the buck”.

There is also a discussion in the comments section of this post.

What a mess.

Investing class action, RYPQX

Last week I started increasing my position in the Reserve Yield Plus Fund (RYPQX: web, prospectus, fact sheet, Y!).  Two weeks ago I finally started buying in to the fund, which is a no-load fund and does not impose the typical $9.99 transaction fee from Ameritrade.  At the beginning of this month, I received the distribution for those shares, pro-rated for the previous month.

The distribution totaled $0.09 for 250 shares held over 3 trading days in the month of May.  Doing the math, this translates into about a 4.4% return on my money annually.

So now that I know how the system works, I’ll continue to put my extra money into the fund to beef up our savings.

I’ll leave the $20,000+ in the Emigrant Direct account, as it’s a bit more liquid than RYPQX.  Remember, if you need the money out of RYPQX, it trades like a mutual fund.  This means that you’ll have to wait till 4pm for the transaction to take place, plus an additional 3 days for the money to settle in the account.  Add to that the transaction time to get the money from the brokerage to your local bank, and you’ll looking at about 7 days before you have your hands on the money.

In comparison, the Emigrant Direct account moves money back and forth in about 2 days.

Investing, Saving Emigrant Direct, RYPQX, savings

Emigrant Direct has preempted any fed rate cut Bernanke could throw at us. Within the last couple of days, Emigrant bank has cut their online savings rate to 4.55%. Still better than I can get at Bank of America, but it’s making online savings accounts look less appetizing when compared to Canadian Royalty Trusts.

Sure, the money is guaranteed at Emigrant, so it’s still a great place to stash emergency funds, but the dropping rate could offset some of the risk in investing in stocks.

Question for the day: At what percentage rate do you quit stashing free cash in the savings account and contribute it to a online trading account?

The last I checked, RYPQX was still paying just shy of a 5% return.

Banking, Saving Emigrant Direct, interest rates, online savings, RYPQX