CORRECTED - U.S. judge signals date for Reserve fund distribution

(Corrects 6th paragraph to say that a court-appointed receiver could file "clawback" lawsuits and not that the SEC could file such lawsuits)

* SEC distribution plan calls for 99 cents a share

* Court arguments over fund's net asset value

* $3 billion available in October

By Grant McCool

NEW YORK, Sept 23 (Reuters) - A U.S. judge indicated on Wednesday he may set Dec. 23 this year for distributions to investors of Reserve Management Co's Reserve Primary Fund whose net asset value dropped below $1 a share in the financial crisis.

The Primary Fund held $785 million worth of Lehman Brothers Holdings Inc LEHMQ.PK-issued commercial paper when Lehman went bankrupt on Sept. 15 last year. "Breaking the buck" is not supposed to happen to money market funds, which have been regarded as super-safe investments.

After two hours of arguments over a U.S. Securities and Exchange Commission proposal for a pro rata distribution to the thousands of investors, Manhattan Federal Court Judge Paul Gardephe did not make an immediate ruling.

Gardephe, however, told a courtroom crowded with lawyers, "I am inclined to set a fixed date of December 23" as proposed by the market regulator and supported by several investors in court papers and oral arguments.

Investors would receive 99 cents a share from the fund, which is being liquidated, under the proposal. Reserve Primary Fund lawyer Tariq Mundiya told the court that "we will be sitting on $3 billion in cash by the third week of October and want to get the money out as soon as possible."

If a receiver was ultimately appointed by the court, the receiver could file lawsuits to "claw back" money from investors who redeemed after 8 a.m. on Sept. 15, 2008, when the fund had a total of $10.7 billion.

Opposition to the plan came from several attorneys for investors, some of whom redeemed at a net asset value of $1 in the frenetic hours following Lehman's bankruptcy.

"No one here is able to say that it (net asset value) wasn't at $1," Caryn Gail Schechtman, a lawyer for ETrade Financial Corp, told the court. "We need to do fact-finding and discovery."

She described the pro-rata distribution as "an unfair and unequal plan."

SEC lawyer Nancy Brown told the judge that "it was important to keep in mind that according to the plan and the fund's numbers, most investors would receive a fairly rapid distribution without incurring litigation costs."

In May, the SEC sued Bruce Bent Sr, one of the pioneers of the money market mutual fund, his son and the investment company over accusations they deceived investors into believing the flagship Primary Fund was safe.

The collapse of the once $62 billion fund triggered a guarantee program by U.S. authorities to prevent a massive outflow from money funds. The collapse of the fund also led to numerous lawsuits.

The case is Securities and Exchange Commission v Reserve Management Company Inc et al 09-4346 in U.S. District Court for the Southern District of New York (Manhattan) (Reporting by Grant McCool; Editing by Phil Berlowitz)