A U.S. district court has ordered that those objecting to the Securities and Exchange Commission's distribution plan for the Reserve Primary Fund must file a statement of objection by July 22 and set a September hearing on the regulator's plan.

The SEC has proposed that the remaining assets of the troubled money-market fund be distributed on a pro rata basis to shareholders whose shares haven't been fully redeemed since Sept. 15, 2008. The regulator also is seeking an order enjoining the Primary Fund from distributing any fund assets, other than for pro rata distributions to investors or ordinary and necessary expenses.

Those who object to the commission's plan must file a statement of objection with the U.S. District Court for the Southern District of New York by July 22. The regulator and the Primary Fund will file any responses to those objections by Aug. 21.

The court will hold a hearing at 9:30 a.m. Sept. 23 on whether it will approve the SEC's plan. That hearing will be held in courtroom 18B of the U.S. Courthouse on 500 Pearl Street in New York City.

By June 22, the Primary Fund will mail copies of the court order to all shareholders of record for unredeemed shares in the fund as of Sept. 15, 16, 17 or 18, 2008. The order is also available on the Web sites of Reserve Management Co. and the SEC.

Reserve Primary Fund "broke the buck" in September 2008, meaning its net asset value fell below the $1 a share money-market funds strive to maintain. It held $785 million in Lehman Brothers Holdings Inc. debt and suspended redemptions Sept. 16, 2008. The fund and its management face numerous lawsuits in relation to its troubles.

The once-$63-billion fund had $4.55 billion in remaining assets as of June 11, according to its adviser. It's holding $3.5 billion of that in a special reserve, to be used for costs and expenses, including legal and accounting fees, pending or threatened claims against it, its officers and trustees, and claims that could be made against its assets.

To date, Primary Fund shareholders have received about 89 cents on the dollar. The SEC objects to the creation of the special reserve fund and contends that if remaining assets were distributed on a pro rata basis, investors would recover about 98.4 cents per share.

The commission objects to the Primary Fund's plan to withhold the $3.5 billion from shareholders until pending and future lawsuits are resolved. In its May 5 complaint, the regulator said that the resolution of lawsuits against Reserve Management; Reserv Partners Inc., the fund's distributor; Bruce Bent Sr., the founder of the Primary Fund; and his son, Bruce Bent II; among others, may lead to "conflicting judicial determinations and inconsistent treatment of shareholders, as well as an inexorable and piecemeal drain on the fund's assets."

Amerprise Financial Inc. (AMP), a broker that put retail clients into the fund, has alleged in a federal lawsuit that the Primary Fund "secretly" tipped off institutions to cash out in light of the Lehman debt. Reserve Management has called claims that it gave investors early word of its problem "absurd."

Harvey Wolkoff, a partner with Boston-based Ropes & Gray and lead attorney on the Ameriprise lawsuit, said Ameriprise supports the SEC's proposal. "Ameriprise believes that all of the investors in the Reserve Primary Fund should be treated equally whether they redeemed" before the fund suspended redemptions or not, Wolkoff said. The only fair resolution is to place all shareholders in the same position, he said.

The SEC's plan would eliminate the $3.5 billion special reserve that has been set aside and distribute that money, but lawsuits would continue to try to make up for any losses, Wolkoff said.

"It does mean that Ameriprise and its investors would get less than $1 per share," he said. "But Ameriprise then has a remedy against the Bents and others who are representing the fund ... to try to make up the difference so that the investors are made whole."

-By Daisy Maxey, Dow Jones Newswires; 212-416-2237; daisy.maxey@dowjones.com